Heads up for the Australian dollar as we are less than a half hour away from the latest RBA monetary policy decision.
The central bank is widely expected to raise the cash rate by 25 bps to 4.60%, which would mark a fourth rate hike this year and take borrowing costs to their highest level since 2011.
Markets have already fully priced in the move with Australia’s four major banks also forecasting a rate hike today. As such, I wouldn’t expect the rate hike itself to necessarily be the main market mover here.
Instead, the bigger question is whether the RBA gives traders any reason to believe another hike could follow in November.
Inflation remains the key concern, particularly with higher energy prices adding another layer of upside risk to the outlook. Meanwhile, RBA governor Bullock has also warned that some of the inflation risks highlighted by the central bank may now be starting to materialise.
That puts the language in today’s statement and Bullock’s press conference after firmly under the microscope. A stronger warning on the inflation outlook or a clear willingness to tighten policy again could give the Australian dollar a lift, while a more measured message could invite a sell the fact reaction instead.
Markets are also pricing roughly 43% odds of another rate hike in November, so there is still plenty of room for today’s guidance to shift that view.
The decision is due at 0430 GMT, with Bullock’s press conference following an hour later.
This article was written by Justin Low at investinglive.com.