Goldman Sachs says RBA minutes lower bar for November hike, with three hawkish signals
Per the full note , Goldman Sachs' assessment of the RBA's recent minutes highlights a potential shift in monetary policy timing, suggesting that the next rate hike could be on the table sooner than previously anticipated. This comes in light of stronger-than-expected domestic capacity signals, with particular emphasis on the implications of the upcoming third-quarter CPI data due on October 28, which will be pivotal for the AUD and short-dated bond yields. The shifts in focus from energy pass-through to underlying inflation suggest that a moderate CPI print could still indicate bullish sentiment if services and core metrics remain robust. While Goldman refrains from making a firm call on a November hike, they assert that the recent conditions have lowered the threshold for action, positioning the CPI release as a crucial determinant of any potential policy adjustments.
What the desk is arguing
Goldman Sachs' read of the RBA minutes points to a greater risk of a rate hike occurring sooner than their current baseline forecasts suggest. Importantly, the minutes articulated an increased concern regarding domestic capacity pressures that were not fully conveyed in the subsequent press conference. This signals a shift in the RBA's evaluation of economic conditions, potentially linking monetary policy adjustments to domestic rather than global factors.
The RBA's board recognizes excess demand as greater than previous assessments indicated, suggesting that if third-quarter CPI attests to underlying inflation, the case for a rate increase becomes compelling. The upcoming CPI data, due on October 28, is likely to be a significant focal point, with any surprise in this release having the potential to accelerate market expectations towards a November rate adjustment.
Where it sits in our coverage
Our current consensus target for the AUD/USD is 1.075, with a range estimated between 1.04 and 1.12. Specific targets from notable firms are as follows: - JPMorgan: 1.10 (Mar26) - BofA: 1.04 (Mar26)
This positioning reflects a nuanced approach, where expectations for the AUD could shift in response to the CPI report, aligning closely with Goldman Sachs' outlook, although the broader consensus remains cautious.
How other firms see it
Firms like JPMorgan and others appear aligned with Goldman’s view, anticipating a hawkish tilt in the forthcoming CPI data. In contrast, BofA suggests a more tempered outlook, implying the potential for a lower rate trajectory.
The upcoming third-quarter CPI figures, alongside the ongoing dynamics in the AUD/USD pair, will be integral to monitor as they may reveal broader implications for consumer spending and domestic inflationary trends.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Goldman Sachs indicates a potential shift in RBA's monetary policy timing.
- 02Third-quarter CPI data on October 28 is crucial for forecasting a potential rate hike.
- 03Underlying inflation signals could drive market expectations for the Australian dollar.
- 04Increased domestic capacity concerns have raised the benchmark for monetary policy action.
Market implications
Traders should watch the AUD/USD closely, particularly in the lead-up to the CPI release on October 28. A robust CPI print could lead market expectations sharply towards pricing in a November rate hike from the RBA, potentially pushing the AUD higher and bolstering short-dated bond yields.
Risks to this view
The primary risk to this outlook hinges on the actual CPI outcome; a soft print could quash bullish sentiment, leading to reduced expectations for any near-term tightening. Furthermore, should global oil prices continue to fluctuate due to geopolitical tensions, this could also distort the inflation dynamics in Australia, altering the RBA's comfort with current rates.
Goldman’s read raises the risk that the next RBA move comes sooner than its own base case. That leaves the third-quarter CPI release as the main event for the Australian dollar and short-dated bond yields. The minutes’ emphasis on domestic capacity shifts the focus from energy pass-through to underlying inflation, so even a moderate headline print could carry hawkish weight if services and core measures stay firm.
Oil still matters at the margin: the minutes noted that domestic fuel prices were running well above the RBA’s August assumptions, and a renewed jump in crude tied to the Iran war would strengthen the case for tightening. Market pricing had already leaned toward further hikes before the September decision, so a hot CPI reading could quickly firm up expectations for November. --- Goldman isn’t calling a November hike yet, but it thinks the RBA minutes have opened the door, and the CPI report later this month will decide whether the board walks through it. Summary: Goldman Sachs economists said minutes of the RBA’s September meeting were more hawkish than the press conference that followed the decision, citing three reasons Among them, the minutes showed increased concern about domestic capacity pressures, with July’s stronger-than-expected CPI data seen as evidence of that Goldman still expects the RBA to keep the cash rate at 4.60% in November, but says the minutes have lowered the bar for another hike, conditional on third-quarter CPI The minutes showed the board judged excess demand to be greater than previously assessed and said it would raise rates further if required Third-quarter CPI data are due on 28 October, ahead of the RBA’s 2 to 3 November meeting Minutes of the Reserve Bank of Australia’s September policy meeting have likely lowered the bar for another interest rate increase in November, according to Goldman Sachs economists.
The bank still expects rates to stay on hold. In a report, three members of Goldman’s economics research team said they viewed the minutes, released on Tuesday, as more hawkish than Governor Michele Bullock’s press conference after the decision, for three reasons. Among them, the economists said the minutes showed increased concern about domestic capacity pressures, with the board treating July’s stronger-than-expected inflation data as evidence of that.
Goldman continues to expect the RBA to hold the cash rate at 4.60% at its next meeting. However, it judged that the minutes have lowered the threshold for a further hike in November, depending on the outcome of the third-quarter consumer price index report. The minutes support that reading.
They showed the board unanimously raised rates by 25 basis points at the 28 to 29 September meeting because several upside risks to inflation flagged in August had either materialised or were building. Those risks included a broader Middle East conflict pushing oil prices higher, cost pressures from the global AI boom, and tighter domestic capacity than assumed. Members said excess demand in the economy appeared greater than previously assessed.
Staff increasingly questioned whether the unemployment rate consistent with target inflation was higher than thought, and business surveys pointed to a drift higher in firms’ inflation expectations. The board also noted that, if global neutral interest rates have risen, the previous 4.35% cash rate was less restrictive than it had been two years earlier. It said holding steady while other central banks tightened could loosen Australian financial conditions through a weaker currency.
Members concluded that they would remain attentive to incoming data and would raise rates further if required. The third-quarter CPI report, due on 28 October at 00:30 GMT (20:30 ET on 27 October), now looks pivotal. The RBA’s next decision follows on 3 November at 03:30 GMT (22:30 ET on 2 November), alongside its updated quarterly forecasts.
A strong reading on underlying and services inflation would test Goldman’s hold call and could push the board toward a second consecutive increase. --- If nothing in November the RBA has another crack in December before a long break until the next meeting 8–9 February 2027: This article was written by Eamonn Sheridan at investinglive.com.
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