It is hard to believe the Reserve Bank of Australia’s monetary policy board would decide to leave the cash rate at 4.60 per cent this week. After a relentless campaign of public communications by RBA officials in recent months, money markets are all but fully priced for a 25bp rate hike.
What is surprising is the unwillingness of economists and markets to factor in further monetary policy tightening beyond this week. Forward markets have allocated a 50 per cent probability of another 25bp rate hike by May 2027. My guess is that more than half of Australia’s surveyed private sector economists will say this week’s hike will be the last.
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