The Australian dollar (NYSE: FXA) is sharply lower after the RBA surprised the market by leaving its benchmark rate unchanged at 3.75% saying it needed more time to judge the effects of the previous three rate hikes.
The decision defied the expectations of all economists surveyed sent 1-month T-bills yields up some 15 basis point. The reaction of the mortgage market may have influenced policymakers.
Governor Stevens noted lenders had increased borrowing costs by about 1% compared with the RBA’s 75 basis point of hikes. The RBA also made reference to Chinese moves to reduce the degree of stimulus in their economy and credit conditions in the major countries.
