The fact that the Australian inflation figures surprised to the downside on Wednesday went somewhat under the radar. Economists at Commerzbank analyze Aussie’s outlook after the Monthly Consumer Price Index (CPI) report.
RBA likely to have reached its interest rate peak in November
The RBA is likely to peak its interest rates in November. When inflation is so low and people are suffering from high mortgage rates it is unlikely to follow with another hike. The market therefore correctly priced the remaining possibility of another hike from early November. On the other hand, Wednesday’s data also showed that rate cuts are unlikely to start anytime soon.
If the RBA takes a similar view of the figures, it is likely to continue to emphasize its determination for the time being and to be skeptical about rate cuts in the near future. Only if inflation continues to fall significantly from February will rate cuts, as currently priced in by the market, look more realistic. Until then, the Aussie is likely to remain supported by the global inflation gap.
