Australia’s 10-year government bond yield climbed back above 5%, edging toward multi-week highs, after the Reserve Bank of Australia left its cash rate unchanged at 4.35% for a second straight meeting, in line with expectations. The unanimous decision reflected the central bank’s view that the economy is slowing broadly as anticipated under tighter financial conditions, while it maintained that another rate hike remains possible should upside inflation risks emerge.
Market participants had largely priced in a hold following weaker-than-expected second-quarter inflation data and a sharper cooling in the housing market than policymakers had projected. The RBA has already raised rates three times this year as persistent inflation and elevated energy costs continue to cloud the outlook.
Following the decision, markets are now assigning roughly a 40% probability to another rate increase this year, down from about 50% beforehand. Investor focus will now shift to Governor Michele Bullock’s testimony before parliament on Friday, preceded by remarks from Assistant Governor Chris Kent on Thursday.
