RBA Hike Bets Remain in Play Amid Modest GDP Growth

The recent Australian GDP growth report has done little to change expectations for further Reserve Bank of Australia (RBA) tightening. The economy grew at a modest pace in Q2, with household consumption rising 0.4% q/q and 1.8% y/y.

However, the details of the report, combined with more recent data, suggest that another RBA hike remains possible. Household spending accelerated 1.1% m/m and 7% y/y in July, while trimmed mean inflation rose 0.5% m/m and remained at 3.6% y/y.

Money markets have repriced to reflect two additional RBA hikes over the coming year, with one-year OIS rising to around 4.80% against the current 4.35% cash rate.