The Reserve Bank of Australia is expected to keep interest rates unchanged in September at 4.35%, as stable inflation and a strong labor market are likely to make the Australian bank's outlook somewhat hawkish.
The central bank is likely to indicate that interest rates will remain high for a longer period, or perhaps rise further after inflation remained high in the second quarter of this year.
However, CPI inflation has slowly declined in recent months, at a slightly slower pace than the RBA's forecasts, and core inflation has remained well above the Australian Reserve's annual target range of 2 to 3%.
Australian central bank governor Michelle Bullock has repeatedly warned this year that flat inflation may call for further rate hikes by the central bank.
On the other hand, the Australian labor market has defied the slowdown in economic activity, with monthly job growth exceeding expectations over the past five months.
While it is still expected that the RBA will not have enough momentum to raise interest rates, it is likely to keep interest rates higher for longer and delay any possible plans to start cutting interest rates.
The Reserve Bank of Australia's hawkish view contrasts with other major global central banks, which have begun to cut interest rates, the latest of which was the Federal Reserve, which cut interest rates last week by 50 basis points amid slowing inflation and the US labor market downturn.
Some market forecasts indicate that the RBA will start the easing cycle in February 2025, while maintaining the stabilization decision this month.
Any hawkish signals from the Reserve Bank of Australia at this month's meeting are likely to push the Australian dollar higher against most currencies.
