Australian Dollar: RBA waits as inflation sticks – Commerzbank

Volkmar Baur at Commerzbank explains that the Reserve Bank of Australia (RBA) is currently waiting to see how inflation and the labor market develop after three interest rate hikes. The July Consumer Price Index (CPI) came in at 3.5%, below expectations, but trimmed-mean inflation remained at 3.6%. Baur anticipates a hawkish stance at the upcoming September meeting but remains doubtful about another rate increase.

The RBA's recent decision to take a cautious approach stems from the fact that they feel well-positioned and wish to observe the ongoing trends in inflation and employment before taking further action. While the July inflation rate decreased from 3.8% to 3.5%, the median forecast predicted a drop to 3.3%, primarily due to the energy component not falling as anticipated.

Baur notes that falling real estate prices may negatively impact the housing component of inflation, but there are no indications of this trend in the current data. The next RBA meeting is scheduled for September 29, and the bank will likely need to adopt a hawkish tone again to demonstrate their preparedness. However, Commerzbank does not believe another rate hike is probable at this time.