RBA Hike Odds Diminish as Bullock Signals No Urgency for Further Rate Increases

The Reserve Bank of Australia's (RBA) next move on interest rates is uncertain ahead of its August 11 meeting, as Governor Michele Bullock signaled that policymakers are comfortable giving previous rate increases time to work.

Australia's Q2 CPI report, released today, will be closely watched for signs of inflation. The RBA has maintained a tightening bias, but Bullock's latest remarks suggest there is no pressing need to tighten again immediately unless core inflation is significantly higher than expected.

The critical threshold for the RBA is 3.8% yoy trimmed mean inflation, above which would revive August hike odds and below which would support an RBA pause. The quarterly trimmed mean inflation measure is expected to rise from 3.6% to 3.7%, still below the RBA's own May forecast of 3.8%.

AUD/USD has been rangebound at resistance ahead of the report, with three headwinds limiting its rally: receding RBA hike expectations, elevated Fed rate-hike expectations due to lingering oil price shock, and deteriorating risk appetite in regional technology stocks.