The Reserve Bank of Australia (RBA) is scheduled to announce its next monetary policy decision during the upcoming Asia-Pacific session (Tuesday, 3:30 am GMT). Bank has kept interest rates unchanged at the four previous meetings but market consensus now expects a hike!
What to know before the RBA rate decision?
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Create account Try a demo Download mobile app Download mobile app- Main interest rate: 4.10%
- Rates last changed in June 2023 (+25 bp)
- 400 basis points of tightening delivered since April 2022
- RBA expects inflation to drop below 3% in Q4 2025
- Q3 CPI at 5.4% YoY (exp. 5.3% YoY, prev. 6.0% YoY) and 1.2% QoQ (exp. 1.1% QoQ, prev. 0.8% QoQ)
- Q3 PPI at 3.8% YoY (prev. 3.9% YoY) and 1.8% QoQ (prev. 0.5% QoQ)
- Employment change in September: +6.7k (exp. +20k, prev. +63.3k)
- Unemployment rate in September: 3.6%, down from 3.7% in August
- Retail sales for September: 0.9% MoM (exp. 0.3% MoM, prev. 0.3% MoM)
- Services and manufacturing PMIs for September below 50 points
- New home sales for September: -4.6% MoM (exp. 1.1% MoM, prev. 8.1% MoM)
RBA expected to deliver 25 bp rate hike
Median consensus among economists and financial institutions is for the Reserve Bank of Australia to deliver a 25 basis point rate hike after staying on hold for almost half a year. Recent inflation data for Q3 2023 came in above expectations with price growth accelerating compared to Q2 on quarter-over-quarter basis. Labor market remains tight and retail sales data hints that consumer spending is still robust. Reasons for a hike are there and recent hawkish comments from RBA members are a strong hint that one may be coming.
However, this would likely be the final one. In spite of a rather solid picture of the Australian economy, money markets price in just a slightly above-50% chance of a 25 basis point rate hike and no more hikes afterwards. First rate cuts are priced in for the second half of 2024.
Money markets price in 56% chance of RBA delivering a 25 basis point rate hike tomorrow. Source: Bloomberg Finance LP
A look at AUDUSD
AUDUSD has been trading higher recently, partially on USD weakening and partially on better performance of Antipodean currencies. Pair bounced off 1-year lows and is now testing resistance zone ranging around 0.6500 mark - the highest level since the turn of August and September 2023. While a 25 bp rate hike is expected by economists, a sub-60% pricing on the money markets shows that there is a room for surprise. Hike not being fully priced in also means that AUD could gain if expectations are met. In case we see a break above the 0.6500 resistance zone, the next level to watch can be found in the 0.6600 area.
Source: xStation5
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