The countdown is on to the September 28-29 board meeting as anticipation ramps up that the Reserve Bank will hike rates for a fourth time this year.Â
Outside of its decision to hike rates in March immediately following the outbreak of the US-Israeli war on Iran, the last time the Reserve Bank adjusted the cash rate at a meeting not preceded by quarterly inflation figures was mid-2023.
But central bank officials have taken a markedly more hawkish tone in recent commentary, prompting economists and traders to reassess the Reserve Bank's reaction function - essentially, how determined the bank is to tame high inflation, even at the expense of jobs.
With the Middle East conflict and the AI boom pushing up prices for energy, agricultural commodities and tech products, it appeared upside risks to inflation flagged by the Reserve Bank had come to pass, governor Michele Bullock told a parliamentary committee on Friday.
While the bank was still trying to keep the employment market in good shape, Ms Bullock made it clear getting inflation back to the middle of its two to three per cent target band was the main game.
"This particular Middle East shock has made us poorer, and we can't respond to that by letting inflation get out of control," she said.
"In fact, it's more important than ever that we bring inflation back to target."
Westpac chief economist Luci Ellis brought her rate rise prediction forward from November to September on the back of Ms Bullock's comments.
While the Reserve Bank board has previously shown a preference to wait for quarterly inflation data, which is due out the day after the meeting concludes, recent rhetoric showed the bank's leadership was anxious to move, Dr Ellis said.
JP Morgan's antipodean analysts don't expect labour market data released on Thursday to prevent a September hike.
"We expect the unemployment rate to hold at 4.5 per cent, alongside a 15,000 employment gain and steady participation rate," JP Morgan's Ben Jarman, Tom Kennedy and Tom Ryan said.
"Our forecast, if realised, is unlikely to alter the RBA's outlook for the labour market and, in our view, keeps the board on track to hike 25 basis points at next week's meeting."
With markets pricing in a September hike at about 90 per cent, Reserve Bank officials still have more opportunities to rein in expectations if they think the odds are overcooked.
Reserve Bank chief economist Sarah Hunter will be interviewed by newly announced Today Show co-host Sylvia Jeffreys on a Nine Network podcast to be released on Tuesday morning.
Meanwhile, Ms Bullock will feature in a fireside chat at the Committee for Economic Development of Australia in Sydney later in the day.
Inflation worries are meanwhile front and centre for Wall Street investors.
US markets closed a volatile week on a muted note on Friday as benchmark Treasury yields topped 5.0 per cent while crude prices reversed earlier gains but remained above $US100 per barrel.
The Dow Jones Industrial Average fell 95.40 points, or 0.18 per cent, to 51,682.64, the S&P 500 gained 0.17 per cent to 7,650.50 and the Nasdaq Composite picked up 0.40 per cent to 26,522.55.
Australian share futures have slipped 57 points, or 0.65 per cent, to 11,451.
The S&P/ASX200 fell 1.2 points on Friday, down 0.01 per cent to 8,731.2, as the broader All Ordinaries gained 12 points, or 0.13 per cent, to 8,922.9.
26°C