The Australian dollar continues to consolidate near the upper end of its trading range, hovering around 0.7220 against the US dollar during Wednesday's Asian session, a level not seen since mid-May. The bullish momentum remains intact as markets digest the clearest signal yet from the Reserve Bank of Australia's deputy governor regarding a potential rate hike this month.
Speaking to media on Tuesday evening, Deputy Governor Hauser described inflation as the "only big problem" facing the central bank, citing three key drivers: the Middle East conflict, the AI-driven global boom, and domestic supply constraints. While he stopped short of declaring a rate increase "inevitable," he left the decision to the committee, with the core question being whether policymakers have "done enough" to tame price pressures.
The RBA has already raised interest rates three times this year, bringing the cash rate to 4.35%, and the major banks now expect a further 25-basis-point hike to 4.6% by year-end. Hauser's remarks align with similar comments from Assistant Governor Hunter on the same day, reinforcing a hawkish tilt ahead of the upcoming meeting.
Hauser was candid in acknowledging public frustration over persistent cost-of-living pressures, calling inflation "unfair" and noting it "makes people angry." This rare direct linkage between policy communication and everyday concerns underscores the urgency of the inflation fight.
The deputy governor described inflation as being driven by a "three-headed monster": first, energy and shipping costs pushed higher by Middle East geopolitical tensions; second, capital expenditure and resource demand from the global AI investment boom; and third, long-standing domestic supply bottlenecks, including labor shortages, housing supply inadequacy, and logistics constraints. He noted that while the central bank could theoretically pursue more aggressive rate hikes if it prioritized inflation-fighting over full employment, Australia has not yet reached that threshold.
By carefully avoiding the phrase "inevitable rate hike" and instead emphasizing that the final call rests with the Monetary Policy Committee, Hauser managed to deliver a hawkish signal while preserving flexibility, highlighting the complexity of the decision ahead of the September meeting.
The RBA's three rate increases this year have lifted the cash rate to 4.35%, with the four major banks widely predicting an additional 25-basis-point hike to 4.6% before the end of the year. Notably, the next inflation data release is scheduled for September 30, which falls after the September policy meeting, meaning policymakers will be making their decision without a complete picture of current price pressures.
The synchronization of Hauser's and Hunter's comments has reinforced pre-meeting hawkish expectations, lending support to the Australian dollar. However, the currency's upside remains constrained by US rate expectations and shifts in global risk sentiment. Market consensus suggests that if the RBA opts to hold steady or deliver only minor adjustments in September, the AUD could face profit-taking pressure; conversely, an actual rate hike could open the door to further gains.
In the near term, the Australian dollar is likely to trade within a 0.7150-0.7250 range, with traders closely monitoring the outcome of the RBA's September meeting and any spillover effects from US inflation data due around the same time. The combination of hawkish central bank rhetoric and the upcoming data calendar keeps the currency's trajectory finely balanced.