The Reserve Bank of Australia (RBA) may continue its tightening path due to persistent inflationary pressures and a tight labour market, according to Bank of New York APAC macro strategist Wee Khoon Chong. This outlook follows the latest inflation figures, which showed a 3.8 per cent increase in the year to January, holding steady from December and surpassing market expectations.
Chong highlighted the contrast between market expectations and the potential actions of the RBA. Currently, the market is pricing in fewer than two rate hikes by the end of 2026, with the possibility of the next hike occurring as early as the May policy meeting. However, Chong anticipates a scenario where the RBA adopts a more hawkish stance, exceeding these market expectations.
A more hawkish RBA, driven by concerns over wage growth and inflation, could positively impact the Australian dollar. Chong suggests this could lead to further outperformance of the AUD compared to its peers. The Bank of New York Mellon Corporation is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. They deliver informed advice and solutions to institutions, family offices and individual investors.
