JPMorgan joins hike call for RBA’s November meeting, sees tightening bias persisting
The desk views the upcoming Reserve Bank of Australia (RBA) meeting as a critical event for the Australian dollar, particularly following JPMorgan's recent endorsement of a rate hike at the November meeting. Per the full note, a supposed 90% chance of a hike is currently priced in, which suggests that a hold could significantly challenge short-dated bond yields and the AUD. Market participants will be keen on the RBA's future guidance and updated forecasts on inflation, as this will shape positions going forward.
What the desk is arguing
The desk frames this as a pivotal moment for the Australian dollar, stressing that any deviation from the nearly fully priced hike could lead to a notable downturn. With JPMorgan now joining the call for a hike based on recent inflation data and RBA commentary, the anticipation heightens around the meeting scheduled for 2:30 pm Sydney time on Tuesday.
Supporting evidence comes from JPMorgan's analysis indicating that the RBA is vocal about inflation not being under control. The expectation is for the RBA to maintain a tightening bias amidst economic strain, with inflationary pressure remaining a topic of concern.
The alternative read would suggest that if the RBA were to hold rates, it might signal that inflation concerns have lessened, contradicting the current trajectory of rate increases.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01JPMorgan has joined the forecast for an RBA rate hike in November, reflecting inflationary pressures.
- 02Market consensus indicates a high likelihood of tightening, around 90%, making a hold the more significant risk for the AUD.
- 03Attention is shifting toward the RBA's guidance on future rate decisions and inflation forecasts, which could have bigger implications for the AUD.
Market implications
Traders should monitor the RBA's upcoming statement closely. A hold on interest rates could lead to a significant pullback in the AUD from current levels around 0.7060, while a hike coupled with hawkish guidance may push the AUD stronger towards the consensus target range.
Risks to this view
A surprise decision to hold rates could invalidate the bullish sentiment on the AUD and short-dated bond yields, compelling traders to reassess their positions. Additionally, acknowledgment by the RBA of softer economic growth impacting inflation could signal a plateau for rate hikes.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UBS | Bullish | 0.7300 |
UOB | Bearish | 0.7120 |
MUFG | Bullish | 0.7000 |
With a hike almost fully priced, the bigger risk for the Australian dollar and short-dated bond yields may be a surprise hold rather than the move itself. Attention is likely to shift to the RBA’s guidance and the refreshed forecasts in its quarterly Statement on Monetary Policy, which will show whether the board sees inflation returning to target without further tightening. A hike paired with a clearly hawkish bias could support the currency, while any acknowledgement that weaker growth is doing more of the work would point to a peak.
Higher fuel and shipping costs linked to the Middle East war remain an upside risk to the inflation outlook the board has to weigh. --- Earlier: RBA set for fifth 2026 hike to 4.85% as banks flag risk of another move in February ING lifts AUD/USD target to 0.71 as it backs a 25bp RBA hike next week RBA set for back-to-back hike after hot CPI, says Natixis’ Garcia Herrero --- JPMorgan has joined the RBA hike camp, betting that a central bank still worried about inflation will move again on Tuesday, even as the economy shows signs of strain. Summary: JPMorgan now expects the Reserve Bank of Australia to raise its cash rate at this week’s meeting The call reflects recent inflation data and comments from senior RBA officials signalling inflation is not yet under control Markets price roughly a 90% probability of another increase JPMorgan sees weak activity limiting the scope for hikes after November, but expects the RBA to keep a tightening bias while inflation stays high The decision is due at 2:30pm Sydney time on Tuesday (0330 GMT, 2230 US Eastern on Monday) JPMorgan now expects the Reserve Bank of Australia to raise interest rates again this week, pointing to recent inflation data and comments from senior central bank officials as evidence that the board’s tightening cycle is not yet complete. Ben Jarman, JPMorgan’s chief economist for Australia, said the RBA has consistently signalled that inflation is not yet under control and that it still has work to do.
Market pricing puts the probability of a further increase in the official cash rate at about 90%, leaving little doubt about the expected outcome. The decision is due at 2:30pm Sydney time on Tuesday, which is 0330 GMT and 2230 US Eastern on Monday. It will be released alongside the RBA’s quarterly Statement on Monetary Policy and its updated forecasts for inflation, growth and unemployment.
The cash rate currently stands at 4.60% after a quarter-point increase in September, so a further move of that size would take it to 4.85%. JPMorgan expects the backdrop to become less supportive of further tightening after this meeting. The bank said weak activity data reduce the likelihood of additional hikes beyond November, but it expects the RBA to keep a tightening bias because inflation remains too high.
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