MUFG warns markets price a February 2027 RBA hike, but August minutes and CPI data suggest earlier action.
Markets may be underpricing the risk of an earlier Reserve Bank of Australia rate hike, according to analysis of August meeting minutes and stronger-than-expected monthly CPI data. Trimmed mean inflation held steady at 3.6% year-over-year, defying expectations for a slowdown and reinforcing RBA inflation concerns.
Current market pricing does not fully account for a rate hike until February 2027, but the RBA’s August minutes indicate a higher likelihood of sooner action. Monthly CPI data further supported this view, suggesting the central bank may need to act more aggressively than anticipated.
The Australian Dollar remains supported by these developments, though analysts caution the currency appears stretched and risks may be shifting.