Melbourne Institute Sees 2.8% Increase in Australian Inflation in July
The Reserve Bank of Australia is expected to keep interest rates unchanged on Tuesday but soften its hawkish stance.
According to market analysis, the Reserve Bank of Australia may maintain interest rates at 4.35% for the sixth consecutive meeting on Tuesday, but weak inflation data and stock market turmoil caused by global safe-haven sentiment may prompt it to sound less hawkish. Although Australian inflation has slowed to a two-year low, it remains well above the Reserve Bank of Australia's target; therefore, the Reserve Bank of Australia is unlikely to completely abandon its hawkish stance. However, given the global economic growth concerns over the US economic recession, major central bank interest rate cuts, and rapidly deteriorating risk appetite, the Reserve Bank of Australia may avoid raising interest rates while insisting on maintaining vigilance against upside risks to inflation.
The final value of Australia's comprehensive PMI for July in the Economic Review was revised downward to 49.9, which is worse than expected and plunged into contraction.
According to S&P Global/Judo Bank data, the seasonally adjusted Australian July Services Purchasing Managers' Index (PMI) final value was revised downwards from the previous 51.2 to 50.4, confirming the initial value dropped only to 50.8, which means that the service industry has expanded for six consecutive months, but the growth rate is moderate and has been the slowest in six months. During this period, new orders for Australian service enterprises have declined for the first time in six months, exports have declined, and employment growth has slowed to its slowest in 19 months. Cost pressures have intensified and fee inflation has accelerated to near one-year highs. The final value of the Australian July Composite PMI was revised downwards from the previous 50.7 to 49.9, falling short of market expectations.
The Reserve Bank of Australia is expected to maintain stability this week, but cannot rule out the possibility of an interest rate hike!
Multiple institutions, including Australia's Commonwealth Bank, predict that the Reserve Bank of Australia will maintain interest rates this week. However, Warren Hogan, a well-known economist at Judo Bank, believes that the possibility of a rate hike in August has decreased, but cannot rule out the possibility. Market analyst Bob Mason believes that if the Reserve Bank of Australia unexpectedly adopts a hawkish stance and US PMI data weakens, it may support the Australian dollar against the US dollar to rise to 0.67. However, investors should be cautious as global economic uncertainty affects demand for the Australian dollar against the US dollar.
Australian Dollar Holds Losses Following PMI Data
High inflation makes it difficult to keep up with the global easing pace. Will the Australian Reserve Bank remain hawkish at its August meeting?
Due to the cooling inflation still being at a high level, this requires Australia's central bank to maintain its key interest rate at its highest level in 12 years. Australia is expected to continue to lag behind the global easing cycle.