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Global Macro-Market Outlook

Australia Outlook Update: Trimming Our Rate Call

By Mikka Pineda
Jul 29, 2011 5:00:00 PM | Last Updated

  • Though the Reserve Bank of Australia (RBA) would normally raise its cash rate target after a strong inflation reading, sluggish demand growth and uncertainty over sovereign debt in the U.S. and eurozone move us to drop our call for a 25-bp rate hike in August.
  • Unless strong wage growth proves broad-based, consumer malaise will keep the RBA on hold at 4.75% until November.
  • The cash rate will top out at 5.00% in 2011 and climb another 75 bps in 2012 as underlying inflation pushes beyond the 2-3% medium-term target.

We no longer see an August rate hike from the RBA. Though Q2 inflation[...]

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