Economists are awaiting key quarterly inflation data but expect the Reserve Bank to hold interest rates despite renewed fighting in the Middle East sending oil prices up again.
The Australian Bureau of Statistics will on Wednesday publish the consumer price index’s second quarter, which shows household inflation.
Reserve Bank governor Michele Bullock will also speak in Sydney on Tuesday, with her speech to be closely watched for indicators on how the central bank intends to approach inflation risks.
NAB senior economist Taylor Nugent says his bank does not believe another rate rise is likely in 2026 despite oil prices rising again due to tensions between the US and Iran.
“Our position is there will be enough confidence in growth slowing in the labour market so that rates don’t need to be tightened further,” he told AAP.
That’s despite risks such as elevated inflation, renewed cost pressures and new oil price levels.
Mr Nugent said the inflation data being released on Wednesday would have captured the calm during the conflict, when fuel prices had plummeted.
The Reserve Bank’s board will next meet in more than two weeks, with the Commonwealth Bank noting the “backdrop shifting rapidly”.
“The housing market has deteriorated, household spending is slowing from the elevated pace seen earlier this year and businesses’ capacity to pass on higher costs is likely weaker following three interest rate hikes,” the bank’s analysis reads.
The Reserve Bank was expected to keep rates on hold for the remainder of 2026, the CBA said.
Research by ANZ is forecasting trimmed mean inflation of 3.7 per cent year on year, slightly below the Reserve Bank’s forecast.
Combined with broader evidence of slowing activity, this should see the central bank hold in August.
However, ANZ noted another hike could not be ruled out in either August or November given the renewed escalation of tensions in the Middle East.
After piling into technology stocks in recent years on the promise of growth from AI, investors have become worried about the need for ever-increasing capital outlays for AI.
Meanwhile, oil prices curiously provided some relief for Wall Street investors otherwise keen to divest chip stocks on worries about massive spending on artificial intelligence ahead of earnings reports.
There was a three per cent drop in crude oil futures on Friday while traders booked profits from a massive rally in the previous five trading sessions after sources said China was pushing to resume stalled Iran peace talks.
The Dow Jones rose 235.60 points, or 0.46 per cent, to 51,947.25, the S&P 500 gained 3.68 points, or 0.05 per cent, to 7,411.98, and the Nasdaq lost 161.87 points, or 0.64 per cent, to 24,975.82.
Australian share futures have jumped 48 points, or 0.55 per cent, to 7,611.
The S&P/ASX200 fell 66.7 points on Friday, down 0.75 per cent to 8,772.3, as the broader All Ordinaries lost 76.6 points, or 0.85 per cent, to 8,941.5.
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