With the hike all but priced, the Australian dollar reaction is likely to turn on the tone of the statement rather than the decision itself. ING expects a hawkish hike to support AUD, though it flags a test below 0.70 against the US dollar as the near-term risk with the greenback near a two-month high, and AUD/USD was trading around 0.70 ahead of the decision. Oil is the wider swing factor, as higher energy prices linked to the Middle East conflict feed directly into the RBA's inflation concerns. Any sign the board sees that energy pass-through as persistent would keep November live in pricing, while a more measured message could leave the currency leaning on the rate differential instead.
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Earlier:
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The hike is all but priced, so the real test for the Australian dollar is whether the RBA leaves the door open to another move in November.
Summary:
The Reserve Bank of Australia is widely expected to raise its cash rate by 25 basis points to 4.60% today, ending a two-meeting pause and taking borrowing costs to the highest level since November 2011. The decision is due at 2:30pm AEST, with Governor Michele Bullock holding a press conference an hour later. It would be the fourth increase of 2026.
Consensus is close to unanimous. A Reuters poll of 34 economists found all but one expecting the hike, while a Bloomberg survey also points to a move to 4.60%. All four major banks, CBA, Westpac, NAB and ANZ, are forecasting a September increase, and money markets are pricing a very high probability of a hike, with estimates ranging from around 80% to 95% depending on the source.
The call has firmed considerably in recent weeks. A month ago, nearly all economists expected the RBA to hold at 4.35%. Trimmed mean inflation then held at 3.6% in July, well above the RBA's end-year forecast of around 3.3%, while growth and employment have proved more resilient than expected. Senior RBA officials appeared before a parliamentary committee on September 18, and many economists read their comments as confirmation that a September move was coming. CBA brought its forecast forward from November, citing higher oil prices among other factors, and ANZ economists said the bank no longer views energy price spikes as a temporary blip.
Attention now turns to the statement and the vote. CBA expects a unanimous decision accompanied by hawkish language, while Westpac expects a split vote reflecting differing views on supply capacity and labour market slack.
Beyond today, most economists see 4.60% as the peak of the cycle. In the Reuters poll, 26 of 31 respondents expect the cash rate to still be at 4.60% at the end of December, with a minority looking for 4.85%. CBA says a September-quarter trimmed mean reading of 1% or more could put another increase on the table, ANZ is forecasting a second hike in November, and CBA has pushed back its expected start to rate cuts to August 2027.
Households are already feeling the shift. Rate-tracking data shows 18 lenders have lifted at least one fixed rate in September, and a 25bp rise would add around $90 a month to repayments on a $600,000 loan if passed on in full.
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Rate hike is due at 2.30pm Sydney local time / 0430 GMT / 0030 US Eastern time.
Reserve Bank of Australia Governor Bullock press conference follows an hour later.,
This article was written by Eamonn Sheridan at investinglive.com.
Source: Investing Live - Central Bank
