Money market traders scrambled on Tuesday to decipher whether the Reserve Bank of Australia’s next move on interest rates would be up or down, after softer economic forecasts were countered by a tough-talking Michele Bullock, who said she “personally” believed another increase may be warranted.
The RBA board voted to keep the cash rate steady at 4.35 per cent, in line with market expectations, and published new quarterly forecasts, which projected inflation would fall below 2.5 per cent within two years. Those forecasts pared future rate rise expectations until Bullock took to the podium to address the media.
“After a rally in the rates market, the presser had a few hawkish comments that saw yields back up,” Westpac strategist Martin Whetton told clients.
One comment from Bullock – broadcast via terminals to the trading desks – swung the market pricing back to where it started the day – with levels implying a 61 per cent chance of one more rate increase to 4.6 per cent by the end of the year. In the futures market, the three-year bond yield initially eased 7 basis points to 4.51 per cent before rebounding.
“I think personally that it’s quite possible we might need to go, but we’ll wait and see what the data tells us,” Bullock said.
Source: https://www.afr.com/markets/debt-markets/markets-whipsawed-by-tough-talking-rba-governor-20260810-p60n13