Australian money markets now indicate a 38 per cent probability that the Reserve Bank of Australia (RBA) will implement a fourth interest rate increase this year at its upcoming policy meeting on November 4. This is a shift from a month ago when markets had fully priced in such a move. The reassessment follows recent economic data, particularly a higher-than-expected inflation print in August. The RBA had held the cash rate steady at 3.6 per cent at its meeting on Tuesday, citing concerns that consumer prices might exceed initial forecasts.
Despite the revised market expectations, some analysts believe that the likelihood of an easing next month is being overstated. Citi G10 rates strategist Ben Wiltshire suggests the probability is now less than 10 per cent, pointing to a tight jobs market and accelerating underlying services inflation as key factors influencing this outlook. Traders have adjusted their forecasts, pushing back the anticipation of a rate reduction to May 2026.
In currency markets, the Australian dollar remained stable at US66¢. The Aussie gained 1.1 per cent in September, marking its second consecutive month of gains. Year-to-date, the Australian dollar has appreciated by more than 6 per cent, driven in part by a weakening of the US dollar. These currency movements reflect the evolving expectations surrounding monetary policy and broader economic conditions in Australia and globally.
