Asia week ahead: Australia rate decision, data on China, India, Japan
Per the full note source, the Reserve Bank of Australia is expected to hold the cash rate at 4.35% at Tuesday's meeting, with inflation surprising decisively to the downside—headline CPI at 3.9% YoY versus the RBA's 4.8% forecast—strengthening the case for an extended hold through year-end. The desk also flags China's July CPI and PPI as likely to moderate, alongside soft credit data, and India's July CPI expected to hold at 4.4% YoY. With no internal coverage on the AUD or INR, the focus remains on the RBA's forward guidance and the ensuing policy path divergence with the Fed.
What the desk is arguing
The RBA is set to keep rates unchanged at 4.35%, with the second-quarter inflation surprise materially shifting the policy calculus. Headline CPI came in at 3.9% YoY, well below the RBA's 4.8% forecast, driven by softer housing and transport costs, while the trimmed mean CPI fell to 3.6% YoY versus a 3.8% estimate. This confirms that price pressures are easing faster than the central bank envisaged, pointing to an extended hold through year-end.
The desk's thesis hinges on the gradual moderation of underlying inflation, with services inflation still elevated at 4.0% YoY but not accelerating. The alternative read—that the RBA might need to hike again—is implicitly rejected, as the data do not support a near-term tightening bias. The market is likely to focus on any hawkish surprises in the statement, but the bar for resuming hikes appears high.
Key takeaways
- 01RBA expected to hold cash rate at 4.35% at Tuesday's meeting.
- 02Q2 inflation surprised to the downside: headline CPI 3.9% YoY vs RBA forecast 4.8%.
- 03China's July CPI and PPI expected to moderate, with weak credit demand persisting.
- 04India's July CPI forecast to hold steady at 4.4% YoY, with food inflation softening.
Market implications
Watch the RBA statement for any shift in forward guidance; an extended hold would likely keep AUD under pressure as the Fed remains on a tightening bias. China's inflation and credit data will be crucial for risk sentiment in the region, while India's CPI will influence INR and RBI policy expectations.
Risks to this view
A marked acceleration in services inflation or a strong rebound in domestic demand could force the RBA to reconsider its hold stance. Also, upside surprises in Chinese or Indian inflation data could alter regional rate expectations and impact cross-currency flows.
Articles Asia week ahead: Australia rate decision, data on China, India, Japan Published 03:24 Asia week ahead Australia China Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Australia's rate decision is the highlight of the week. Key data releases include China’s inflation and credit, India's July CPI, and Japan's June current account balance and July PPI Lynn Song Asia Research highlights of the week Taiwan’s double-digit GDP growth extends into the second quarter Taiwan’s sticky inflation strengthens the case for a September hike Asia FX Talking: Washington steps in to stop the Asian slide Australia : RBA expected to keep rates unchanged We expect the Reserve Bank of Australia to hold the cash rate at 4.35% at Tuesday’s monetary policy meeting. Inflation surprised decisively to the downside in the second quarter.
Headline CPI eased to 3.9% year-on-year, well below the RBA’s 4.8% forecast, driven by softer housing and transport costs. While services increased to 4.0% YoY, the RBA’s preferred trimmed mean CPI series fell below its estimate of 3.8% YoY. It stands at 3.6% YoY, suggesting underlying prices continue to moderate gradually.
Collectively, price pressures are easing faster than the RBA envisaged, strengthening the case for an extended hold through year-end. China: CPI and PPI seen moderating China releases its inflation data over the weekend. We expect CPI inflation to edge down slightly to 0.9% YoY in July, and PPI inflation to cool to 3.8%.
Purchasing managers’ index data showed ex-factory prices cooling. China’s credit data should be released sometime during the week. We expect weak credit demand to continue amid limited corporate investment appetite and soft consumer borrowing.
India: Headline inflation expected to remain steady India releases its July CPI inflation data on Wednesday. The market expects inflation to remain unchanged at 4.4% YoY. Food inflation should soften from June's elevated 5.1%, supported by ample cereal stocks.
Fuel inflation, however, is set to edge higher as recent petrol, diesel and compressed natural gas (CNG) price hikes continue to pass through. Services inflation is expected to remain sticky, reflecting persistent underlying cost pressures. Japan: PPI and current account Japan’s key data releases include the June current account balance on Monday, and July PPI on Thursday.
The consensus expects producer prices to rise to 7.5% YoY from 7.1% in June. This reflects continued upstream price pressure from higher energy prices, yen weakness and import costs. Key events in Asia next week RBA Japan India China Australia Asia Pacific Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China. Prior to joining ING, he worked at China Construction Bank International, China Merchants Securities (HK), and Haitong… In this article Asia Research highlights of the week Australia : RBA expected to keep rates unchanged China: CPI and PPI seen moderating India: Headline inflation expected to remain steady Japan: PPI and current account
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