Goldman Sachs lowered their terminal RBA rate forecast to 4.6% (previously at 4.8%)

Yesterday we had the latest official inflation report from Australia:

• Australian Q2 Headline CPI 0.8% q/q (vs. 1.0% expected)

Responses so far:

• AUD - decline in inflation should be enough to keep the RBA on hold at their next meeting
• ICYMI - NAB changed forecast for RBA next week to 'on hold' (prior was +25bp rate hike)

Via Goldman Sachs, also trimming rate hike forecasts for the Reserve Bank of Australia:

• lowered their terminal RBA rate forecast to 4.6% (previously at 4.8%)

But still expecting a rate hike next week (the Reserve Bank of Australia meeting is August 1), citing:

• We acknowledge material risk that the RBA remains on hold in August, but lean slightly towards another hike given still elevated underlying and services inflation, the stronger-than-expected labour market, and the rapidly reflating housing market.
• We expect a final hike in November alongside finalisation of the Statement on the Conduct of Monetary Policy – which we expect will effectively require the RBA to target a lower inflation target … that is, 2.5 per cent, rather than allowing the top of the 2-3 per cent target band.

This article was written by Eamonn Sheridan at www.forexlive.com.

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