With a hike close to fully priced, the Australian dollar may struggle to rally much on the decision itself, and a sell-the-fact dip is possible if the statement leans toward a pause. Guidance is the swing factor for the currency. A signal that more tightening is possible, in line with ANZ’s view, would support the AUD and push front-end yields higher. A message closer to AMP’s hike-and-hold call would likely cap gains. The AUD, trading near 70 US cents, also faces strong outside drivers, with the US midterm elections and Iran tensions setting the broader risk mood. With the Federal Reserve also on a hiking path, rate differentials offer less of a tailwind than the RBA move alone might suggest.
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Earlier:
Deutsche Bank stands alone with RBA hold call as 31 of 32 economists tip a hike
JPMorgan joins hike call for RBA’s November meeting, sees tightening bias persisting
RBA set for fifth 2026 hike to 4.85% as banks flag risk of another move in February
ING lifts AUD/USD target to 0.71 as it backs a 25bp RBA hike next week
RBA set for back-to-back hike after hot CPI, says Natixis’ Garcia Herrero
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Economists agree the RBA will hike again, but the split over what comes next, along with a hike already in the price, means the guidance will matter more than the move for the Australian dollar.
Summary:
The RBA is widely expected to raise its cash rate by 25 basis points to 4.85% on Tuesday, its fifth increase this year and the highest level since 2008
The decision is due at 2:30 p.m. AEDT (0330 GMT), followed by Governor Michele Bullock’s press conference
HSBC’s Paul Bloxham has a November hike as his base case; ANZ sees a material risk the cash rate reaches 5.10% by December or February
AMP chief economist Shane Oliver expects a hike to protect the RBA’s credibility, but thinks it should be enough to keep the bank on hold for now
September-quarter trimmed mean inflation of 1.0% beat the RBA’s 0.8% forecast, while house prices fell for a seventh straight month in October
With the move largely priced, the AUD’s reaction is likely to depend on guidance rather than the hike itself
The Reserve Bank of Australia is widely expected to raise its cash rate by 25 basis points to 4.85% on Tuesday. That would be its fifth increase this year and take the rate to its highest level since 2008. Economists agree on the move but are split on what comes after it.
The decision is due at 2:30 p.m. AEDT (0330 GMT), with Governor Michele Bullock’s press conference to follow. The bank lifted the cash rate to 4.60% in September, and hawkish remarks from senior officials since then have pushed forecasters toward another rise. Underlying inflation has also run hotter than the RBA projected, with the trimmed mean rising 1.0% in the September quarter against the bank’s 0.8% forecast.
HSBC chief Australia economist Paul Bloxham has made a November hike his base case. ANZ, which also expects a rise, sees risk of more to come. Its economists said concerns among senior RBA officials that inflation expectations might be shifting raise a material risk the cash rate reaches 5.10% in December or February.
AMP chief economist Shane Oliver expects the RBA to hike to step up its fight against inflation. He argues that holding steady could damage its credibility and further entrench higher inflation expectations. He takes a less hawkish view of the path beyond Tuesday, though, saying this month’s move should be enough to keep the bank on hold for the time being. That marks a shift for Oliver, who had earlier not expected a November hike.
The backdrop complicates the outlook. House prices fell for a seventh consecutive month in October, adding to pressure on borrowers as earlier rate rises continue to feed through. Any acknowledgment of that strain in Tuesday’s statement would be read as a signal the RBA is nearing the top of its cycle.
For the Australian dollar, the bar for a strong rally looks high. Interbank futures had priced a hike as likely, leaving the currency more sensitive to the tone of the statement and Bullock’s comments than to the decision itself. A clear signal that further tightening is possible would offer support, while a message closer to AMP’s hike-and-hold view could see the currency give up ground.
This article was written by Eamonn Sheridan at investinglive.com.
