With 33 of 34 economists expecting a hike, Tuesday's move is close to fully priced. The Australian dollar is therefore more likely to react to the RBA's statement and Governor Bullock's press conference than to the decision itself. If the bank signals it is open to hiking again, AUD could get a boost and front-end yields could rise, as markets price in a November move. A clear "one and done" message could instead take some of the tightening premium out of the currency. Australia's policy rate would also rise further above most of its G10 peers, which supports AUD on the crosses, especially AUD/JPY and AUD/NZD.
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Report via Reuters on its poll.
Jobs data yesterday won't stand in the way of nrext week's hike:
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A month ago economists expected the RBA to hold in September. Now almost all of them expect a hike to 4.60% on Tuesday, with the argument moving to whether this is the peak or just a stop on the way.
Summary:
The Reserve Bank of Australia is expected to raise its cash rate by 25 basis points to 4.60% at its meeting on Tuesday, September 29, according to a Reuters poll that landed just after 6am Sydney time on Friday, an early wake-up call for anyone on the local rates desk. All but one of the 34 economists surveyed between September 17 and 24 expect the move, which would lift the cash rate to its highest level since late 2011.
A hike on Tuesday would be the RBA's fourth this year, taking cumulative tightening in 2026 to 100 basis points. Most respondents see it as the final increase of the cycle, with 26 of 31 forecasting the cash rate will still sit at 4.60% at the end of December. A handful expect a further increase to 4.85% by year-end.
The consensus has swung sharply in a short space of time. A month ago, nearly all economists expected the RBA to stay on hold in September, and median forecasts had the cash rate peaking at 4.35%. That view has been overtaken by stronger inflation pressure since the August meeting and by Governor Michele Bullock's doubts that policy was restrictive enough to return inflation to the bank's 2% to 3% target band.
Core inflation is the central worry. The trimmed mean measure, the RBA's preferred gauge, held at 3.6% in July, while the bank's own forecast has it easing to 3.3% by the end of the year. The economy also grew a little faster last quarter than the roughly 2% pace the RBA estimates it can sustain without adding to price pressures, even as momentum faded.
HSBC chief economist for Australia and New Zealand Paul Bloxham, one of five expecting another hike next quarter, argued the RBA is growing impatient with above-target inflation. He said it needs to show that getting inflation back to target within its late-2027 horizon comes first. Growth that beat expectations, disappointing productivity and a July monthly inflation reading that ran too hot prompted him to switch to a September hike call. He expects core inflation to beat forecasts in coming months.
Among the major domestic banks, CBA, NAB and Westpac see the cash rate ending the year at 4.60%, while ANZ expects 4.85%. NAB said the risks are clearly skewed towards a follow-up move in November, though that is not its base case.
Beyond this year, economists broadly expect the cash rate to stay at 4.60% through mid-2027, before views diverge sharply from the third quarter. The median forecast has the rate back at 4.35% by the end of 2027, within a wide range running from 4.85% at the top to 4.10% or lower at the bottom. For now, Tuesday's decision and the tone of the accompanying statement will shape whether markets treat 4.60% as a peak or merely a waypoint.
This article was written by Eamonn Sheridan at investinglive.com.
Source: Investing Live - Central Bank
