Commerzbank’s Volkmar Baur has expressed skepticism regarding the likelihood of another Reserve Bank of Australia (RBA) interest rate hike this year, despite the market currently pricing in a 50% probability for such a move [1]. Baur argues that the fading of energy-related upside risks, particularly as oil prices have continued to fall since the last RBA meeting, diminishes the case for further tightening [1].
The report highlights that the RBA is not scheduled to hold a monetary policy meeting until August, and recent data releases are considered of secondary importance for the Australian dollar at this time [1]. The market’s expectation for another rate hike remains at approximately 50%, but Commerzbank maintains its view that this will not materialize [1].
A key concern cited is the ongoing decline in Australian real estate prices. According to Cotality, nationwide real estate prices fell by 0.4% in June compared to the previous month, marking the sharpest monthly decline in three years [1]. For the second quarter, this equates to a 0.7% drop from the previous quarter, with Sydney and Melbourne experiencing declines of over 1% each in June [1]. The data suggests not only a continued fall in prices but also an acceleration of the decline [1].
Commerzbank warns that a significant drop in real estate prices could negatively impact consumer spending and weigh on the broader economy [1]. The risk profile, therefore, appears to be shifting towards downside risks, and Baur concludes that inflation would need to rise significantly for the RBA to consider another rate hike this year—a scenario he does not expect [1].
CONCLUSION
Commerzbank sees limited prospects for another RBA rate hike in 2024, citing falling energy prices and accelerating declines in real estate values as key factors. The market remains split, but the bank expects downside risks to dominate unless inflation rises sharply. This outlook suggests a cautious stance for the Australian dollar and related markets.