Rates as of 0500 GMT

Market Recap

AUD was the focus of attention as the Reserve Bank of Australia RBA hiked by 25 bps to 0.35, a totally unforeseen move. Out of the 30 forecasts compiled by Bloomberg, five people thought theyd hike to 50 bps and six thought they wouldnt hike at all. The rest forecast a 15 bps hike to 25 bps.

The RBA Boards rationale was

The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected. There is also evidence that wages growth is picking up. Given this, and the very low level of interest rates, it is appropriate to start the process of normalising monetary conditions.

Their forward guidance now reads

The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead. The Board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases.

Previously they said

Over coming months, important additional evidence will be available to the Board on both inflation and the evolution of labour costs. The Board will assess this and other incoming information as its sets policy to support full employment in Australia and inflation outcomes consistent with the target.

Note the changes they no longer need any additional evidence and they switched from the abstract sets…