Australia's Economy Slows, But Interest Rate Hike Still Looms

The Reserve Bank of Australia's (RBA) latest interest rate hike is still on the table, despite a slowdown in the country's economy during Q2. The annual growth rate dropped to 2.1%, down from 2.5% in the previous quarter, but this was still higher than forecasted at 1.8%. This moderate decline suggests that inflation may not be under control yet.

The RBA has already hiked interest rates three times this year, with limited success in curbing inflation. Consumer prices remain stubbornly high, with a trimmed mean measure of 3.6% in July, above the central bank's target range of 2-3%. The odds of another rate hike have increased to 57%, up from 48% before.

According to Marcel Thieliant, head of Asia-Pacific at Capital Economics, 'the key point is that the economy is still growing close to trend, which means that the existing excess capacity isn't being eroded.' This suggests that another rate hike may be necessary to keep inflation in check.