Bendigo Bank Chief Economist David Robertson said the Reserve Bank of Australia's comments in its August Monetary Policy Statement were sufficiently hawkish to retain the view that another rate hike, most likely in November, remains more likely than not, despite rates being held at 4.35% as expected, according to a Friday statement.
Robertson said oil prices back below $90 per barrel provide some relief, but the assumption that energy prices have peaked may be tested by a lack of progress in US-Iran peace talks and access through the Strait of Hormuz, both posing risks to the RBA's forecasts for core inflation to return to near 2.5% by December 2027.
Robertson said assumptions of RBA rate cuts in 2027 seem very speculative, but with no urgency for another hike apparent, rates are expected to remain on hold in September.
The RBA now sees unemployment nudging 5% by late next year, with Robertson noting that any variations to that profile will be relevant for monetary policy, while military conflicts impacting supply chains and trade tensions back in focus will further test the resilience of the economy, the statement added.
Robertson said Bendigo Bank leans toward a mildly stronger Australian dollar this year, due to interest rate differentials, outperformance of major trading partners in Asia and downside risks to the US dollar as its debt-to-gross domestic product ratio approaches 125%.
Residential property prices have broadened their decline, with most capital cities seeing modest falls, though the central bank noted that business investment and demand for capital remain strong across industries, which may lead to potential drivers of recovery next year as the economy looks beyond the conflict in the Middle East, the statement added.