Goldman Upgrades RBA Hike Forecast Amid Inflation Surprise

Goldman Sachs has upgraded its forecast for an Australian Dollar (AUD/USD) interest rate hike by the Reserve Bank of Australia (RBA), citing a surprise increase in inflation. According to Goldman's economists, the RBA will now raise rates to 4.60% in November, up from their previous expectation of 4.35%. This change is due to the stronger-than-expected July inflation data, which showed a 1.0%mom increase and year-over-year growth easing by 30bp to 3.5%yoy.

The underlying inflation measure, trimmed mean, also increased by 0.5%mom in July, while annual trimmed-mean inflation remained at 3.6%. The breadth of price pressures was another concern for the RBA, with market services inflation accelerating and consumer durables rising more than expected. Goldman raised its third-quarter trimmed-mean forecast to 0.93% quarter-on-quarter as a result.

The AUD/USD exchange rate responded positively to the news, hitting a 12-week high around 0.7183 before falling back due to Friday's dollar surge. However, this move does not alter Goldman's expectation of an RBA rate hike in November, with a material risk of an earlier hike in September.