The Reserve Bank of Australia left its benchmark interest rate on hold on Tuesday after cooling inflationary pressures and weak household spending, while leaving the door open for future rate hikes.
The second consecutive pause in rate hikes suggests the RBA may be nearing the end of its tightening cycle.
AUD/USD traded lower at 0.6663 after the decision, while the rate-sensitive three-year yield fell to 3.82%.
The decision underscores the RBA’s more cautious approach to policy compared with the Fed‘s.
The Fed raised interest rates by 25 basis points last week, bringing its cumulative hikes to 525 basis points, well above Australia’s 400 basis points.
That partly reflects the rapid pass-through of the RBA’s rate hikes to the country’s borrowers, who mostly have variable-rate mortgages, compared to the 30-year fixed-rate mortgages that most people in the U.S. have.
