Australian Stocks Rally as RBA Governor Cools Rate Hike Bets

Australian stocks rose after Reserve Bank of Australia Governor Michele Bullock's speech, which softened traders' bets on near-term rate hikes. The S&P/ASX 200 index gained 0.6% despite briefly dipping earlier in the session, according to Reuters.

Bullock said the economy is adjusting largely as expected, but stressed that underlying inflation remains too high and could lead to further rate increases if necessary. Investors focused on this aspect of her speech, leading them to lower their expectations for an August rate hike to 21% from 30%, and reduce November hike expectations to around 55% from 80%.

The market's shift in rate expectations had a positive impact on rate-sensitive sectors like banks and real estate. Lower expected interest rates can lift valuations and ease concerns about borrowing costs, which is why these areas tend to benefit when traders adjust their rate hike predictions.

The speech set the stage for the upcoming release of quarterly inflation data, which could validate the market's optimism or push rate expectations back up.