Australia: Difficult decision lies ahead for the RBA – UOB

Pablo Piovano FXStreet

Lee Sue Ann, Economist at UOB Group, comments on the upcoming RBA gathering on August 1.

Key Takeaways

Headline CPI came in at 0.8% q/q for 2Q23, lower than expectations of 1.0% q/q, and the reading of 1.4% q/q in 1Q23. Compared to the same period a year ago, CPI rose 6.0% y/y, also lower than expectations of 6.2% y/y, and the 7.0% y/y print in 1Q23.

Meanwhile, employment rose by 32,600 positions in Jun, following a 76,500 surge in May. The participation rate remained around record-highs of 66.8%. Strong job growth saw the jobless rate unchanged at 3.5%.

The Reserve Bank of Australia (RBA) is aware that rates are “clearly restrictive”, and there is a chance they remain on pause at 4.10%. However, we look for a further 25bps rate hike, keeping in mind that inflation rates remain substantially above the RBA’s target band of 2-3%. The decision on 1 Aug, will nonetheless, be a close call.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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