RBA Meeting Won't Deliver Rate Hikes, But Hawkish Tone Expected

Volkmar Baur at Commerzbank expects the Reserve Bank of Australia (RBA) to keep interest rates unchanged at its upcoming meeting, aligning with market pricing. However, he believes there is scope for a slightly hawkish tone due to high petroleum prices and reduced hike expectations.

Baur argues that the medium-term bias is towards a rate cut, but until markets fully price this outlook, the Australian Dollar (AUD) will remain under pressure.

With no expected changes in the cash target rate, Baur notes that the market has already priced in a 99% probability of keeping rates unchanged. The RBA's interpretation of diverging trends in labor and inflation markets is also expected to be closely watched.