The Australian dollar rose slightly on Monday as investors bet the country’s central bank would be more upbeat at a policy meeting this week, and that an interest rate increase would not be ruled out.
The Reserve Bank of Australia (RBA) concludes its two-day meeting on Tuesday and is expected to keep rates at 4.35%, having suspended them since last November.
That’s the view of all 25 analysts polled by Reuters, with the exception of one, who favors an increase to 4.6% given that inflation proved surprisingly stubborn in the first quarter. .
Markets estimate that there is about a 1 in 10 chance of seeing an increase, which will increase to 4 in 10 by September.
All major local banks – ANZ, CBA, NAB and Westpac – continue to believe the next move will be a rate cut, but not until November at the earliest.
However, recent strong domestic cost figures are likely to force the RBA to revise upwards the short-term inflation outlook and test the Board’s confidence that inflation will return to its 2-3% target range. by the end of 2025, compared to 3.6% in the first quarter.
“While we don’t expect the council to explicitly discuss a rate hike, Tuesday’s communication will be more optimistic than in March,” said Adam Boyton, head of Australian economics at ANZ.
“We expect the board to draw attention to the risks associated with service inflation, in particular.
NAB analysts expect the RBA to return to a tightening trend, after turning neutral in March, although the CBA and Westpac doubt it will change course so quickly.
The risk of a hawkish turn kept the Aussie firm at $0.6615, after hitting a two-month high of $0.6650 on Friday following a weaker US jobs report. Major resistance lies at the March high of $0.6667.
The New Zealand dollar held steady at $0.6003, after hitting a three-week high of $0.6050 on Friday.
The Reserve Bank of New Zealand (RBNZ) meets on May 22 and is almost certain to keep rates at 5.50%, although markets expect a reduction by next month. October following recent employment data. (Reporting by Wayne Cole; editing by Lincoln Feast.)
