Rate hiking cycle might be over, but don't expect a cut until mid-2027, says NAB FX strategist

NAB's senior FX strategist, Rodrigo Catril joined The Business ahead of interest rate decisions in both the United States and Australia.
The US is facing an inflation challenge after the latest CPI figures printed a 4.2 per cent rise in the 12 months to May, the highest rate in three years. That's creating a problem for the new US Federal Reserve chair, Kevin Warsh ahead of his first FOMC meeting. The new Fed chair, hand-picked by Donald Trump, is coming to the job as a supporter of lower interest rates. Rodrigo Catril says to get the job, Kevin Warsh needed to tell President Trump that he was more keen on rate cuts than rate hikes. But rising inflation sparked by the Iran conflict is seeing the market moving to a potential hike by the end of the year. He says markets are not expecting any rate movements at the June 16-17 (US time) meeting, but will be watching the messaging coming from the Fed.

On Tuesday, the Reserve Bank of Australia will make its decision on interest rates. NAB has forecast a hold at the June meeting, and says the next move could be down.
Mr Catril says although inflation could rise because of the energy shock, NAB says the RBA will look through the inflationary impacts.
"When we get towards the end of the year...our sense is the economy and economic activity will have slowed down....and we think there's going to be enough there to give the RBA the ability to start considering rate cuts around the middle of 2027."
As for the local currency, The NAB FX strategist says the performance of the Australian dollar is very much dependent on the outcome in the Middle East.

Senior financial analyst with Capital.com, Kyle Rodda also joined The Business to discuss the path investors are treading between oil shocks and AI stocks.
#ABCBusiness

Subscribe: http://ab.co/1svxLVE

Note: In most cases, our captions are auto-generated.

#ABCNEWS #ABCNEWSAustralia