RBA Expected to Lift Rates Again as House Prices Fall Sharply

what happened

The Reserve Bank of Australia's policy board is widely expected on Tuesday to raise interest rates for the fifth time this year, Market Talk reports.

The move is almost fully priced in, so attention will center on the bank's new inflation forecasts and on any signals about further increases. Economists are not ruling out another hike in December or February.

The tightening comes as house prices fall at their fastest pace in more than 40 years. There is also scope for the war in the Middle East to escalate.

why it matters

For markets, the key question is less the decision itself than the tone that accompanies it. Hawkish signals could support the Australian dollar and Treasury bond yields, while cautious forecasts could weigh on them. A surprise in the decision itself looks unlikely, so the reaction will likely hinge on the wording and the inflation outlook.

market impact

Australian dollar and government bonds: the decision and rate guidance will set the market reaction

• ↔Australian dollar mixed — hawkish guidance would support it, while cautious forecasts would weigh on it
• ↔Australian government bonds mixed — hawkish signals could push yields higher, while cautious forecasts could lower them

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instruments