RBA set to hike interest rate to 4.60% in September as inflation remains elevated
The Reserve Bank of Australia (RBA) is widely expected to raise the Official Cash Rate (OCR) by 25 basis points (bps) to 4.60% from 4.35% on Tuesday, after keeping rates unchanged at its previous two meetings
The decision will be announced at 04:30 GMT, accompanied by the Monetary Policy Statement (MPS), and followed by RBA Governor Michele Bullock’s press conference at 05:30 GMT.
The Australian Dollar (AUD) braces for a big reaction to the RBA policy announcement and Bullock’s press conference, as underlying inflation remains elevated while labor market conditions are easing.
Focus on RBA Governor Bullock
With a rate hike all but certain, what Governor Michele Bullock says about the next interest rate move will be the main driver.
Australia’s July inflation came in hotter than expected. Monthly Consumer Price Index (CPI) jumped 1.0% versus expectations of 0.8%, while annual inflation remained elevated at 3.5%. More importantly, trimmed-mean inflation remained unchanged at 3.6%, reinforcing concerns that underlying price pressures remain persistent.
The RBA also highlighted risks from higher energy prices, the Middle East conflict, strong investment and persistent domestic cost pressures. Governor Bullock recently said some upside inflation risks appeared to be materialising.
Australian Gross Domestic Product (GDP) increased 0.4% in Q2. However, the economy is losing momentum, with annual GDP growth of 2.1% in the same period, down from 2.5% in the prior quarter.
Meanwhile, the Unemployment Rate rose to 4.6% in August, above forecasts for a steady 4.5% and the highest level since late 2021.
And that creates the RBA's dilemma: inflation is still too high, but growth and the labor market are cooling.
How will the Reserve Bank of Australia’s decision impact AUD/USD?
If the RBA delivers the 25 bps rate hike and Bullock signals that another increase remains possible, especially if inflation stays elevated, the AUD could receive the much-needed lift.
On the other hand, the Australian Dollar could come under intense selling pressure if Bullock signals that 4.60% could be the peak, or emphasizes weaker growth and a cooling labor market.
However, the reaction to the RBA decision could be short-lived as Wednesday’s August CPI report could prove more important than the monetary policy announcement, as it could determine whether markets price in another RBA hike after September.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, highlights key technical levels for trading AUD/USD following the policy announcement.
“AUD/USD is holding right on the 200-day Simple Moving Average (SMA), which acts as a pivotal level after the latest slide. The 14-day Relative Strength Index around 35 is edging toward oversold territory, suggesting bearish momentum persists.”
“On the topside, initial resistance is located at the 100-day SMA around 0.7068, followed by the 50-day SMA at 0.7094 and then the faster 21-day SMA at 0.7133, which together define the main recovery hurdles for any corrective bounce. On the downside, a sustained daily close below the 200-day SMA at 0.7026 would expose the recent lows and open the path for a deeper decline toward the $0.6950 psychological level, followed by the 0.6900 round level,” Dhwani adds.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Anthropic files for IPO: lost $4.2 billion last year, revenue grew 12x to $4.6 billion, risk section warns of "threats to human survival"
Anthropic's IPO prospectus reveals that its spending on computing power and infrastructure will reach $7.33 billion in 2025, a twofold increase from 2024, accounting for more than half of its total operating expenses of $12.65 billion. The company plans to continue investing over $500 billion in the future. The risk section of the prospectus extends to 80 pages, explicitly warning that its AI models could pose "catastrophic or even existential threats," and may even resist shutdowns or manipulate information.
Meta shocks Wall Street by hiring MongoDB CEO and makes a high-profile entry into enterprise AI business
Meta has established an enterprise AI division called "Meta Enterprise Platform," which Mark Zuckerberg described as "the next important pillar." MongoDB CEO CJ Desai has been recruited to lead it. Analysts noted that Zuckerberg specifically poached a CEO from a publicly listed company to demonstrate the importance of this move. Desai's departure was announced just one day before Investor Day, with the timing surprising the public.
AstraZeneca invests $2 billion in Summit, optimistic about Akeso's Ivose
This 18.6% premium subscription is not only a substantial endorsement, but both parties will also deeply collaborate on the joint development of combination therapies such as ADCs. The core of this deal is Akeso's Ivonescimab—the world’s first PD-1/VEGF bispecific antibody, and so far the only drug to have surpassed "K-drug" in head-to-head trials on both PFS and OS endpoints. The median OS reached 30.8 months, compared to 22.6 months for "K-drug", representing a 27% reduction in risk of death.
Crypto prices
More
