Over the following two days, the Reserve Bank will provide additional details about its thinking, providing a chance to validate or refute rumours that Australia’s scorching labour market could result in more aggressive rate increases.
At 11.30 a.m. on Tuesday, the central bank will release the minutes from the board’s July meeting.
A half-hour later, deputy governor Michele Bullock will speak in Brisbane about how people should prepare for interest rate increases.
Before the RBA enters a pre-meeting blackout ahead of its August 2 meeting, RBA Governor Philip Lowe will speak at the Australian Strategic Business Forum in Melbourne on Wednesday morning.
Markets will be keenly monitoring the talks, according to Alvin Tan, an analyst at RBC Capital Markets, to determine whether there is any hesitation to rule out a 75 basis point interest rate hike next month.
Given that data was released last week showing that the unemployment rate reached 3.8% in June, a 48-year low, many market players see a rate increase of that size as inevitable.
Prior to the middle of next year, the RBA had not anticipated the jobless rate to fall so low.
Other central banks have recently made disproportionate movements as well. On Wednesday, the Bank of Canada shocked the markets by raising interest rates by 100 basis points.
At its meeting on July 26–27, the US Federal Reserve is widely anticipated to raise rates by 75 basis points.
Markets would be keeping an eye on the speeches, according to Mr. Tan, for any indications that the RBA would be changing its quarterly Statement of Monetary Policy or that it would need to move monetary policy into “restrictive territory” if the cash rate rose above a more neutral range of 2 to 3 percent. At the moment, it is 1.35 percent.
Given everything that has occurred since the June meeting, Mr. Tan said the minutes would likely be less illuminating.
In a note, Mr. Tan stated, “We find it difficult to see how this week’s RBA message does not err hawkish.”
A number of economists believe that the Reserve Bank of New Zealand may decide to raise rates by 75 basis points next month as a result of Stats New Zealand’s report on Monday that inflation on the other side of the ditch increased by a higher-than-expected 7.3 percent in the June quarter.
This development could be concerning for Australia.
On July 27, the Australian Bureau of Statistics will publish consumer price index information for the country’s June quarter.