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BBH sees Australian CPI cooling, but AUD carry still supportive
RBA cash rate futures still imply a 60% chance of one more 25 bps hike by year end to 4.60%, even as inflation is expected to ease in July.
Brown Brothers Harriman analyst Elias Haddad expects Australia’s July CPI to cool, with both headline inflation and a trimmed mean measure drifting lower, supported by softer labor conditions and slower wage growth, according to an FXStreet note.
The forecast calls for headline CPI at 3.3% year over year in July versus 3.8% in June, while trimmed mean CPI is expected to average 3.5% versus 3.6% previously, with the RBA continuing to focus on the trimmed mean gauge from the quarterly CPI.
BBH said RBA Minutes and Q2 private capex are key inputs for rate expectations, and that current cash rate futures price in a 60% probability of one final 25 bps increase by year end, taking the rate to 4.60%.
While Haddad flagged risks skewed toward an extended pause because policy is already somewhat restrictive, the note pointed to AUD support from attractive carry and Australia’s commodity-linked exposure, including areas tied to energy, AI, and defense.