A key indicator of core prices increased for a fourth month in May, and Australian consumer inflation surged to a six-month high. These unexpected data caused traders to rethink their expectations and increased the likelihood of an interest rate hike this year.
A key indicator of core prices increased for a fourth month in May, and Australian consumer inflation surged to a six-month high. These unexpected data caused traders to rethink their expectations and increased the likelihood of an interest rate hike this year.
In addition, the three-year bond futures fell eighteen ticks to 95.93, the lowest level in three weeks, while the Australian dollar gained 0.5% to $0.6684.
From a nonexistent probability before the data, markets now indicate a 60% chance of a quarter-point hike from the Reserve Bank of Australia by November. A move is likely in August, depending on the complete second-quarter CPI report results.
UBS and Deutsche Bank anticipate rate increases for August, while the National Australia Bank has postponed its first easing call until May 2025 from November.
UBS Chief Economist George Tharenou anticipates that the Q2 CPI will register a quarterly rate of 1.1%, surpassing even the RBA’s own projections.
A rate hike in August is a “close call,” according to our revised CPI forecasts… Nevertheless, Tharenou stated, “We see enough evidence to change our base case view.” She also mentioned the possibility of a follow-up hike, which would probably occur in November.
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