Australian Dollar: Hawkish RBA hike expectations – ING
ING’s Francesco Pesole expects the Reserve Bank of Australia to deliver a 25bp rate hike to 4.60%, with Governor Bullock likely leaving the door open for further tightening. Persistent inflation concerns, tight labour markets and resilient growth underpin this view.
ING economist Francesco Pesole anticipates the Reserve Bank of Australia to increase interest rates by 25 basis points to 4.60%, with Governor Bullock potentially signaling further tightening. Persistent inflation concerns, tight labor markets, and robust growth contribute to this outlook. ING predicts the Australian Dollar will strengthen, forecasting AUD/USD to reach 0.720 by year-end.
The Reserve Bank of Australia will reveal its policy decision at 05:30am BST tomorrow, and ING expects a 25bp rate hike to 4.60%. Market participants are fully pricing in the hike, and consensus is unanimous in favor of it, which could heavily influence the Australian Dollar's reaction. If Governor Michele Bullock signals support for more rate hikes, the AUD may benefit.
Inflation concerns persist, and despite potential declines in crude prices, domestic fuel prices are expected to remain elevated for a longer period. Core CPI measures have remained consistently high, labor markets are tight, and growth has been stronger than anticipated. Consequently, markets may maintain expectations for additional tightening post-meeting, providing support to the AUD. The forecast remains that AUD/USD will return to 0.720 by year-end.
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