While softer inflation could pressure the RBA to cut rates, forward guidance will be crucial. In September, RBA Governor Michele Bullock stated that while headline inflation could come within the target range, it may not reflect underlying inflation trends. Insights into underlying inflation will likely dictate the RBA rate path, with tight labor market conditions another consideration.
Expert Views on the RBA Rate Path
AMP Head of Investment Strategy and Chief Economist Shane Oliver recently gave his insights into RBA monetary policy, stating,
“Falling job vacancies & hiring plans evident in our Jobs Leading Indicator continues to point to slower jobs grth ahead. But for now the RBA will regard the jobs mkt as still tight, which on its own reduces the possibility of a rate cut by yr end. Our base case is Feb for first cut.”
Australian Dollar Daily Chart
In Wednesday’s US session, Q3 GDP and ADP labor market data could fuel AUD/USD volatility. Better-than-expected US data may drag the AUD/USD toward $0.65 if Aussie inflation is softer than forecast. Conversely, weaker ADP and GDP numbers could raise bets on a December Fed rate cut, potentially pushing the AUD/USD toward $0.66.
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