ATFX: RBA Raises Rates by 25 Basis Points, High Oil Prices May Push Inflation Higher

Feature: ATFX Forex Column Submission

On March 17th, ATFX: Today at 11:30 AM, the Reserve Bank of Australia announced its March interest rate decision, raising rates by 25 basis points, with the benchmark rate increasing from 3.85% to 4.1%. Five members voted in favor of raising the cash rate, while four members voted to keep it unchanged. This week is a super central bank week, with six countries’ central banks announcing their rate decisions. The Reserve Bank of Australia is the first to release its decision.

In fact, the Reserve Bank of Australia is very likely to be the only central bank among this super week to choose a rate hike. In February, the RBA already raised rates by 25 basis points. If they raise rates again in March, it will form a rate hike cycle, which could boost the Australian dollar. The other five central banks are most likely to keep their benchmark rates unchanged.

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Concerns over high inflation are the main reason prompting the RBA to raise rates. Historical data shows that since June 2025, Australia’s core inflation rate has risen from 2.9% to 3.4%, increasing for eight consecutive months. Generally, inflation between 2% and 3% is considered moderate and healthy. Once inflation exceeds 3%, even reaching over 5%, it can lead to runaway inflation, severely disrupting people’s lives.

The core responsibility of any central bank is to maintain price and inflation stability, and the RBA is no exception. If the RBA does not raise rates early to curb inflation, Australia could soon face hyperinflation. Especially amid the backdrop of increased international oil prices due to US-Iran conflicts, imported high inflation could occur at any time. As mentioned in the RBA policy statement: The conflict in the Middle East has caused a significant rise in fuel prices, which, if sustained, will exacerbate inflation.

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In terms of market trends, since February, AUDUSD has been in a sideways consolidation, with resistance at 0.7186 and support at 0.6895. There are no signs that this consolidation is about to end. The rate hike by the RBA is bullish for the Australian dollar, but the bullish effect has not been very evident in the market; so far, the daily candlestick shows a small doji pattern.

In the medium to long term, since April last year, the Australian dollar has been steadily appreciating against the US dollar. The main reason is that Trump pressured the Federal Reserve to cut interest rates, creating a divergence in monetary policies between Australia and the US. Although the US-Iran conflict has driven oil prices higher and there is a risk of US inflation spiraling out of control, Trump still urges the Fed to cut rates. The divergence in monetary policy remains possible. The upward trend of the Australian dollar may continue.