Australian Dollar: RBA tightening risks rise – TD Securities

TD Securities’ Prashant Newnaha highlights that Australia’s July Consumer Price Index (CPI delivered a strong inflation impulse, with headline and trimmed mean measures beating consensus and remaining uncomfortably high. He argues this outcome makes the September Reserve Bank of Australia (RBA) meeting live and increases the likelihood of a rate hike by year-end, even though TD Securities still officially forecasts the cash rate to remain on hold.

July CPI boosts RBA hike odds

"There was a solid inflationary impulse in the July CPI release. Annual headline CPI landed at 3.5% and Annual Trimmed Mean CPI was 3.6%, beating consensus."

"July CPI data now firmly lines up the September RBA meeting as live with a hike by year-end looking more likely. We retain our on-hold call but concede this is looking less tenable."

"Indeed, delving deeper into the data speaks to the upside risks to inflation the RBA has flagged in communication accompanying and following the Aug rate decision."

"Today's CPI outcome certainly adds weight to the discussion around the potential for the RBA delivering a hike by year-end and possibly as early as next month."

"We concede today's CPI release lines up the Sep RBA Board meeting as live, with the Nov meeting as the next likely month the RBA potentially hikes. Our on-hold call is looking less tenable."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)