<p style="" class="text-align-justify">And it seems like we are already there in Australia. They hinted that rates were in neutral territory last month <a href="https://www.forexlive.com/news/rba-plays-it-straight-hints-that-rates-are-now-in-neutral-territory-20220906/" target="_blank">here</a> and even with a case to be more aggressive today, they did not. It looks very much like we are moving towards a mean reversion of less aggressive moves i.e. 25 bps – which will be the next logical steps for other major central banks too.</p><p style="" class="text-align-justify">In the case of the RBA, they upped their inflation forecasts while downgrading their growth projections. Stagflation much? It is either they are worried about the economy or they are worried about conditions in the housing market. Or perhaps both. But essentially, there is something that is leading them to shift gears in the tightening cycle.</p><p style="" class="text-align-justify">And when you look at how things are progressing in Europe, the UK, and even the US, the pathway is not that different at all.</p><p style="" class="text-align-justify">We are already in the second-half of the tightening cycle for major central banks at the moment but it finally looks like said narrative is turning into action. That will eventually lead to slower and less aggressive rate hikes amid rising recession risks. And in that instance, the playbook will be a rather straightforward one: <a href="https://www.forexlive.com/news/when-bad-news-is-good-news-20220726/" target="_blank">When bad news is good news</a></p>
This article was written by Justin Low at forexlive.com.
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