The Australian dollar traded above $0.71, hovering near an eleven-week high as investors digested the Reserve Bank of Australia’s August meeting minutes. The Board concluded that the current cash rate is sufficiently restrictive to return inflation to target within a reasonable timeframe, though several members highlighted a significant risk that inflation could remain more persistent than anticipated.
The RBA kept the cash rate unchanged at 4.35% for a second consecutive meeting two weeks ago, following three increases earlier this year, but reiterated that further tightening remains on the table should inflation risks intensify. However, recent soft labor market data has tempered expectations of an imminent move. Markets are now assigning only a 13% probability to a rate hike in September, while pricing in roughly a 67% chance of an increase by February 2027.
As a result, Wednesday’s release of monthly inflation figures will be closely watched for policy guidance. Headline inflation is projected to slow to 3.2% from 3.8%, even with a 0.8% rise on the month, while the trimmed mean measure is expected to edge down to 3.5% from 3.6%.
