The Reserve Bank of Australia (RBA) board members decided to raise the official cash rate (OCR) by 25 basis points (bps) from a record low of 0.10% to 0.35% at their May 3 monetary policy meeting.

The decision surprised markets to the upside, as they had priced in a 15 bps lift-off.

The central bank dropped its ‘patient’ stance on the inflation developments at its April meeting, clearly shifting towards a hawkish pivot.

AUD/USD reaction

The AUD/USD pair jumped over 50-pips in an immediate reaction to the RBA decision.

The spot was last seen trading at 0.7133, up 1.23% on the day.

About RBA rate decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.