At 12:30 on July 5th, Beijing time, the Reserve Bank of Australia will announce its interest rate decision, after the market expected the Reserve Bank of Australia to raise interest rates by 40 points, which will be the third time in a row. With the resolution time approaching, more and more institutions now believe that the rate hike may reach 50 basis points.

 

 

 

 

 

 

 

The Aussie Federal Reserve remains committed to fighting inflation against the backdrop of a tightening labour market and strong household spending. Australia's unemployment rate held steady at a 50-year low of 3.9 per cent in June and retail sales rose 0.9 per cent in May, the fifth straight monthly gain and double the consensus forecast for a 0.4 per cent increase. Meanwhile, the RBA's widely watched wage price index (Wage Price Index) rose at an annualised rate of 2.4 per cent in the quarter to March, the fastest pace since late 2018.

 

 

 

However, the main catalyst for a larger rate hike remains rising inflation expectations. According to the latest figures released by the Melbourne Institute, Australian house price growth expectations rose to 6.7 per cent in June from 5 per cent in May 2022. After the RBA raised its inflation forecast to 7% by the end of 2022, the market expects the RBA will have to increase the pace of rate hikes, to close to 3% by the end of the year.

 

 

 

The current investment bank's latest views on the RBA decision are as follows:

 

 

 

1. Westpac: RBA to raise interest rates by 50 basis points

 

 

 

Westpac expects the RBA to decide to raise the official cash rate (OCR) by 50 basis points to 1.35% from 0.85%. The bank also said they were particularly interested in any guidance that RBA President Lowe might provide on the August meeting, where they expect the RBA to raise rates by a third straight 50 basis points, before raising rates in September. Monthly suspension of interest rate hikes. Australia's June quarter inflation data released on July 27 will be the key data affecting the RBA's August interest rate decision

 

 

 

2. Standard Chartered Bank: RBA expected to raise interest rates by 50 basis points

 

 

 

Standard Chartered thinks the RBA will raise rates by 50 basis points to 1.35%. In addition, the bank believes that inflation expectations in Australia continue to rise, while supply-side pressures, especially energy prices, remain high; unless companies' willingness to hire starts to decline, wages are likely to rise sharply. And Australia's excess household savings (about 11% of GDP) and a tight labour market should sustain spending in the early stages of monetary policy normalisation amid rising inflation and mortgage rates

 

 

 

3. Deutsche Bank: We expect the RBA to hike rates by 50bps

 

 

 

4. ING Bank looks forward to the RBA interest rate decision: it is expected to raise interest rates by 50 basis points

 

 

 

The ING team said the RBA is more likely to raise rates by another 50 basis points tomorrow, but markets do not appear to be pricing in this fully. Nonetheless, the Aussie has largely been decoupled from monetary policy and short-term interest rate dynamics, while still being driven primarily by dollar movements and the global risk environment. Even with a hawkish surprise tomorrow morning, the expected risk is for the Aussie to pull back to pre-meeting levels immediately after a very brief jump, as the market remains bearish on high beta currencies (high risk, high reward) in the current market environment currency)

 

 

 

5: Morgan Stanley: The RBA will raise interest rates by 50 basis points in July and August, and 25 basis points in November

 

 

 

Morgan Stanley Australia economist Chris Read expects the RBA to hike rates by 50 basis points in July and August, followed by 25 basis points in November, bringing the cash rate to 2.6%, and said Australian employment and inflation The full-blown slowdown won't be felt until later this year, which will keep the country's rate hikes on track in the second half of 2022, although risks in 2023 are still increasing.

 

 

 

AUD/USD managed to break above the uptrend line support at 0.6862 as expectations for a rate hike from the Reserve Bank of Australia intensified. According to market analyst Dhwani Mehta, if the RBA's policy guidance hints at the possibility of another 50bps rate hike in August, AUD/USD could break the strong resistance at 0.6920 and eventually rise towards 0.7000.

 

 

 

On the other hand, if the RBA unexpectedly hikes rates by just 25bps, or is hesitant about its future tightening path, it could reinforce selling interest and push AUD/USD towards 0.6600.