Australia’s 10-year government bond yield slipped below 5% on Tuesday but remained close to its highest level since July 2011, as markets digested the latest minutes from the Reserve Bank. The central bank signaled uncertainty over the future path of interest rates following two hikes earlier this year, citing risks stemming from the war in the Middle East. The board acknowledged the need to weigh the potential impact of a prolonged conflict on both inflation and economic activity.
Markets are currently pricing in a 60% probability of another rate increase in May, with about 65 basis points of additional tightening anticipated over the course of the year. Key inputs ahead of the next policy meeting will include first-quarter inflation figures, labour market data, and monthly consumer spending indicators, all due in April.
Separately, Treasurer Jim Chalmers said the economy is unlikely to contract in the second quarter, even as growth slows. His remarks contrast with some economists’ expectations of a downturn driven by higher interest rates, rising fuel costs, and weakening consumer confidence.
