Australian Dollar: Persistent inflation may prompt another RBA rate hike - Standard Chartered

Standard Chartered’s Nicholas Chia expects a 4.85% cash rate in Q4. Following stronger-than-projected Q3 underlying inflation, he sees the Reserve Bank of Australia raising rates, likely on 3 November. The bank forecasts the first rate cut in Q3 2027, but flags risks of additional tightening or a later start to easing.

4.85% cash rate expected as RBA easing is pushed back

"We now expect the Reserve Bank of Australia (RBA) to lift the cash rate to 4.85% in Q4, likely at the 3 November meeting."

"It also does not help that Q3 trimmed mean inflation (1% q/q SA) came in above the RBA’s projection (0.8%), while short-term inflation expectations have inched up."

"But pre-existing capacity pressures are likely to exacerbate the worsening inflation outlook, with oil prices near cycle highs and upside surprises to global growth feeding through to the Australian economy, potentially delaying a return of inflation to the RBA’s target."

"Specifically, RBA messaging and the September meeting minutes suggest that it is not too concerned about the steady increase in the unemployment rate, given that other labour-market indicators (e.g. vacancies) have improved."

"We remain attuned to the risk of further follow-through by the RBA or, at a minimum, a later start to policy easing in 2027, although we maintain our call for the first RBA rate cut in Q3-2027."

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