AUD: RBA options after softer inflation – Commerzbank
Finance AUD: RBA options after softer inflation – Commerzbank Commerzbanks Volkmar Baur explains that softer underlying inflation in Australia has reduced market confidence in another Reserve Bank of Australia (RBA) rate hike next week, after two consecutive moves in February and March. While headline inflation remains above target, trimmed mean and services inflation look less worrying, leaving the RBA room to pause, which could make next week pivotal for the Australian Dollar (AUD). RBA may pause after two hikes “Next week, the Reserve Bank of Australia will hold its next monetary policy meeting and must decide whether to raise interest rates for a third consecutive time. As of yesterday, the market was pricing in an approximately 80% probability of such a move. However, following this mornings inflation figures, the situation no longer seems quite so certain.” “Of course, the overall rate has risen significantly. On a month-over-month basis, prices rose by 1.1%, pushing the annual rate to 4.6% – well above the central banks target range (2–3%). However, the details look significantly less concerning. The transportation component did rise by 8.9% year-over-year, driven by a roughly 25% increase in gasoline prices.” “But there was no discernible impact on other components. The Reserve Banks preferred core measure,