The Asian session, tomorrow, Tuesday, the seventh of June, will witness the meeting of the monetary policy members of the Reserve Bank of Australia to discuss monetary policy developments and determine interest levels after the bank began tightening monetary policy at the May meeting for the first time in ten years and raising interest rates by 25 points. Basically as expected.

Analysts and economists’ expectations indicate that the Bank will continue to tighten monetary policy for the second consecutive meeting and will raise interest rates by 25-40 basis points to reach 0.60% or 0.75% compared to the current 35%, and may raise it even to 0.85% by raising it by 50 basis points.

So, there is a consensus that the bank will raise interest rates as it did in the May meeting, but the difference here lies in the expected rate of hike, as the rates converge among analysts and economists among the three levels, but it seems that the rate is closest so far to the bank raising interest by 40 basis points.

The last reading of inflation in Australia amounted to 5.1% on an annual basis, at its highest level since 2009. Here comes the main challenge in the Australian economy, as in other global economies, but even if the inflation figures are high in Australia, it is considered somewhat not dangerous if compared, for example, to New Zealand 6.9 % or the largest economy in the world, the US economy is 8.3%, so it is illogical for Australia to resort to raising interest rates by 50 basis points at least in today’s meeting (10% expected rate of it).

The Reserve Bank of Australia is considered the last bank among the major banks that began to tighten monetary policy, and it is also unlikely to continue raising interest rates by 25 basis points, as it is expected to have less impact on inflation, but this percentage until writing this report is more than 40 % in market expectations.

The 40 basis point hike in today’s meeting appears to be the closest by 50% in light of the severe risks of inflation and the current low level of interest rates, in addition to the continued rise in energy prices (oil and gas).

Expected scenarios

Raising by 25 basis points the current prices of the Australian dollar by a large percentage, and accordingly the movement will be based on the interest statement and the tone of the bank members towards the future of interest.

A 40 basis point hike (expected by a large percentage) We will witness increases in the Australian dollar, but it is not strong, given that it is calculated by no more than 30% in the current prices, and also the completion of the movement will be based on the interest statement.

Surprising the markets and raising interest rates by 50 basis points, the Australian dollar will rise directly on its impact.