Australian Dollar: RBA seen hiking as inflation risks build – Standard Chartered

Standard Chartered’s Nicholas Chia now expects the Reserve Bank of Australia (RBA) to raise the cash rate to 4.60% at its 29 September meeting, revising a previous call for a hold. Chia cites recent RBA messaging focused on upside inflation risks and resilient economic momentum. It also delays the projected start of RBA rate cuts to Q3-2027 from Q1-2027.

RBA path revised with later cuts

"We now see the Reserve Bank of Australia (RBA) raising the cash rate to 4.60% at its 29 September meeting, above the cycle high of 4.35%. We previously expected it to stay on hold through the remainder of 2026 (see RBA – Keeping all options on the table). We had expected nascent indications of labour and housing-market weakness to keep underlying price pressures in check and temper RBA hawkishness."

"However, recent RBA messaging suggests it is highly attuned to the materialisation of upside risks to inflation, with oil prices near triple digits and the AI boom adding to price pressures, worsening the policy trade-off for the RBA."

"We think this removes an impediment to further policy tightening, irrespective of the outcome of the August labour-market report (due on 24 September). Aggregate economic momentum appears to be holding up, despite the three rate hikes thus far, and the central bank is likely to consider the current policy stance as modestly restrictive."

"We do not preclude further RBA hikes in Q4, but this would likely be conditional on an upside surprise in the Q3 CPI print (to be released in late October) and continued resilience in growth and spending."

"We also push back our forecast for the first RBA rate cut to Q3-2027 (from Q1-2027 prior). The central bank is likely to take a more cautious view of incoming data and await sustained evidence of below-trend growth before considering policy easing."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)