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- Australia: Fall in inflation could lower rate hike expectations, weighing on Aussie – Commerzbank
Australia: Fall in inflation could lower rate hike expectations, weighing on Aussie – Commerzbank
The Reserve Bank of Australia (RBA) will be closely watching inflation data on Wednesday. Economists at Commerzbank analyze the implications for the AUD.
Expectations of a rate hike in August could be lowered further depending on how much inflation has fallen
Will the RBA hike its key rate again in August? Not necessarily, as of course inflation developments play an important role.
Since the start of the year inflation has fallen, sometimes even more than expected by the Bloomberg consensus. This, together with concerns that the tightening could go too far due to the lagging effect of monetary policy on the economy, tipped the scales in favour of unchanged interest rates in the last rate decision.
That is why attention focuses on the Q2 inflation data due for publication on Wednesday. Depending on how much inflation has fallen, market expectations of a rate hike in August, which already is no longer expected by the majority, could be lowered further, which would principally weigh on AUD.
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