Westpac Bank: Reserve Bank of Australia's interest rate hike expectations have actually cooled

Luci Ellis, chief economist at Westpac Bank, said that the Reserve Bank of Australia's decision to keep interest rates unchanged is in line with market expectations, but what is more noteworthy is the change in its policy guidance. Westpac believes that the statement in the Reserve Bank of Australia statement that "it is prepared to raise interest rates only if upward risks to inflation are realized" is clearer than the broader "if needed" wording at the May meeting. Although the Reserve Bank of Australia did not make a clear statement, it has actually lowered its expectation for raising interest rates. Westpac's basic expectations have shifted to keeping interest rates unchanged until the middle of next year, based on inflation and labor market data that are lower than the Reserve Bank of Australia's May forecast. Despite this, Westpac cautiously describes this as a "hawkish pause" rather than a "relaxation of interest rate limits", and there is still the possibility of further interest rates in the market for the rest of the year, although this possibility is small and mainly depends on the transmission effect of energy-related costs and the direction of the situation in the Middle East.