AUD/USD at 0.8825 after RBA Sits at 2.5%

The Reserve Bank of Australia on Tuesday kept interest rates on hold at a record low of 2.5 percent, as expected, at its first policy meeting of the year.  The Australian dollar jumped 1 percent to $0.8837, its highest level in nearly two weeks, while shares were little changed.

Analysts say despite speculation that the RBA could ease rates following recent dismal employment data, a spike in the inflation rate will keep the central bank in check.

Employment figures for December showed the number of people employed decreasing by 22,600, well below consensus expectations for a 7,500 increase.  “A pick-up in the inflation rate to 2.7 percent year on year in the fourth quarter showed that the room for more easing is very much limited and we continue to think that the easing cycle already finished in August last year,” wrote analysts at Credit Agricole in a report.

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