HSBC: The Reserve Bank of Australia is expected to raise interest rates in February as the job market tightens.

HSBC Chief Economist Paul Bloxham said that Australia's employment data in December performed strongly and significantly better than expected. He said that as signs of tightening in the job market appear, inflation rates have risen above the Reserve Bank of Australia's target range of 2%-3%. Bloxham expects that the trimmed mean inflation for the fourth quarter will be 0.8% quarter-on-quarter, still higher than the Reserve Bank of Australia's target range on an annual basis. He said that these employment data make it difficult to say that the tightness of the job market is easing. Bloxham now believes that a rate hike in February is very likely, but he warns that it will be painful for the country's economy.