MUFG: The Strait of Hormuz standoff and Trump's hawkish stance still leave the risk of RBA rate hikes

MUFG said the standoff in the Strait of Hormuz and Trump's hawkish stance left the Reserve Bank of Australia (RBA) interest rate hikes still at risk. MUFG believes that RBA is currently facing externally driven inflation shocks rather than domestically generated inflation, which has changed the speed of policy response. Although the RBA's communication appears to be in no hurry to raise interest rates, the market has already begun to price this risk and is expected to have a rate increase by March next year. MUFG believes that if energy prices rise significantly, the RBA may raise interest rates again in September, but does not currently feel a sense of urgency.