Australian dollar gets no support from well-flagged rate hike
AUD•The Reserve Bank of Australia unanimously raised its cash rate by 25 basis points to 4.60%, as expected, while leaving the door open to further hikes. The Australian dollar fell 0.3%, and markets lowered the implied chance of a November hike to 32%.
1. Rate decision and outlook
The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60%, the fourth hike this year, in a unanimous decision. Governor Michele Bullock said financial conditions were tight, but the board was unsure whether that would be enough to bring inflation down and wanted to assess the impact of previous hikes.
2. Markets scale back bets
Markets cut the implied chance of a November hike to 32% from 44%, and the chance of a December move to 50% from 60%. The Australian dollar fell 0.3% to $0.6993. NAB chief economist Sally Auld said the RBA may wait and react only if it receives more bad inflation news, while maintaining a forecast for rates to remain on hold.
3. Inflation data ahead
August consumer price data was due Wednesday and forecast to show inflation accelerating to 4.1% from 3.5%, while core inflation was expected to remain at 3.6%, above the RBA's 2% to 3% target range. BlackRock Australia's Katherine Palmer said the release would be an important gauge of domestic price pressures and a key input into the policy outlook.
