Australian Dollar: RBA tailwind seen fading – Commerzbank
Commerzbank’s Volkmar Baur argues that market expectations for 1.5 further Reserve Bank of Australia hikes look excessive after softer August CPI data. While inflation remains above target, he highlights lagged effects of past tightening and weakness in the real estate sector. Baur concludes the RBA is likely to wait, leaving the Australian Dollar unlikely to gain additional support.
Commerzbank's Volkmar Baur suggests that market expectations of the Reserve Bank of Australia making further interest rate hikes are overly optimistic, after softer August CPI data. Despite inflation remaining above target, he points to the lagged effects of previous tightening measures and the decline in the real estate sector.
Baur predicts the RBA will likely postpone its decisions, leaving the Australian Dollar without additional support. Following the Reserve Bank of Australia's monetary policy meeting, the released CPI figures today underscore why the market's previous expectations of 1.5 additional rate hikes may be too much. While it's undeniable that inflation is still excessively high and will require time to normalize, interest rate adjustments take time to materialize, especially in the real estate market, where building permits fell again in August by 6.1% and property prices in major cities continue to decline.
Consequently, the RBA would be prudent to wait and observe the situation over the coming months. As a result, the Australian Dollar is not expected to receive any extra tailwinds.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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