RBA Rate Hike Bets Rise Amid Unexpected GDP Surge

Australia's economic growth accelerated unexpectedly in the second quarter, exceeding forecasts and reinforcing the case for another interest rate hike by the Reserve Bank of Australia (RBA).

The country's gross domestic product (GDP) rose 0.4% in the three months through June, surpassing a predicted gain of 0.3%, according to data from the Australian Bureau of Statistics.

This is particularly concerning for the RBA, which aims to bring inflation back within its target range of 2-3%. As Alex Joiner, chief economist at IFM Investors, noted: 'The economy risks not slowing quickly enough for the Reserve Bank of Australia (RBA) to achieve its inflation objectives.'

The market now expects a rate hike in either September or November, with a move in September seen as more likely than not. Traders also price an 80% chance of another hike in the first quarter of next year.

Australia's policy-sensitive three-year yields rose to their highest since March following the data, while benchmark 10-year bond yields reached levels unseen since July 2011.