Is a rate hike back on the RBA’s agenda?

In its latest policy decision, the RBA continues to argue that it is not ruling out anything interesting or excluded. This speaks to the uncertainty surrounding the inflation outlook, in which they also argued that the process would not go smoothly.

Regardless, we continue to see pricing pressures persist in Australia. These may only be monthly inflation figures, but they still give an idea of ​​how things are going. The quarterly report will always be the most scrutinized, but it’s hard to ignore today’s numbers.

The main takeaway is that inflation continues to run well above the RBA’s 2-3% target range.

And it appears that price pressures are becoming more resilient and stubborn in recent months. So where does this leave the RBA?

Well, a rate hike is arguably on the cards again now, especially after Bullock said they discussed whether to raise rates last week.

And the market probabilities also clearly reflect this. August looks set to be tight, with the chance of the RBA leaving the policy rate unchanged now falling to around 67%. That was about 90% before the inflation data earlier. Meanwhile, September is starting to look like a coin toss, with the odds of a rate hike now climbing to around 40%. It stood at around 12% today.

The second quarter CPI report on 31 July will be a key release for the RBA ahead of its 6 August meeting. Mark your calendars.


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