Australian Rate Increase Could Be More Likely Than Markets Expect

SYDNEY—With the Federal Reserve under pressure to cut interest rates more, its counterpart in Australia is facing a different dynamic with implications for global currency and fixed-income markets.

The Reserve Bank of Australia’s board meets in February against a backdrop of a series of troubling indicators for investors who have gotten used to looser monetary policy. Pricing pressures remain acute. Private sector demand is running hot. And the housing market is booming once again.