Australian Dollar: RBA hike expectations shape outlook – ING

ING economists Deepali Bhargava and Lynn Song expect the Reserve Bank of Australia (RBA) to raise rates by 25bp, citing a still-hot economy, tight labour market conditions and upside surprises in Gross Domestic Product (GDP) and inflation. They note some cooling in the housing market but see risks to inflation as skewed higher. August Consumer Price Index (CPI) is projected to rise further, driven by Diesel and food prices and persistent core pressures.

RBA seen delivering decisive hike

"We expect the Reserve Bank of Australia (RBA) to deliver a decisive 25bp rate hike on Tuesday, reflecting an economy that continues to run hot across multiple fronts."

"Labour market conditions remain tight, second-quarter GDP growth surprised to the upside, and recent inflation readings came in stronger than expected."

"Separately, August CPI data is likely to accelerate further to 4.1% year-on-year, driven primarily by higher diesel and food prices, alongside persistent underlying core inflation pressures."

"While the housing market shows signs of cooling, we expect the RBA to emphasise that risks remain tilted to the upside and further vigilance is required to ensure prices return sustainably to target."