Australian bond traders are almost fully pricing in a rate hike next year, spurred by recent comments from Reserve Bank of Australia (RBA) governor Michele Bullock. Bullock cautioned policymakers that persistent inflation would “have implications for the future path of monetary policy”. Her remarks have intensified speculation about the central bank’s next move.
Money markets are now indicating a 97 per cent probability that the RBA will increase the cash rate to 3.85 per cent by Christmas of next year. This expectation has steadily grown over the past week, especially after a recent inflation report strengthened the view that the central bank’s easing cycle has likely concluded.
It is worth noting that earlier this year, the RBA implemented three cash rate cuts in response to economic conditions. However, the focus has now shifted towards addressing inflationary pressures, signalling a potential shift in the central bank’s monetary policy approach. Investors and economists will be closely watching upcoming economic data for further clues regarding the RBA’s future decisions.
