RBA Rate Hold: Experts Divided on Future Cuts

AUD: RBA Expected to Maintain Interest Rates amid Expert Warnings of No Cuts Until 2025

The RBA is expected to maintain 4.35% rate at tomorrow meeting analysed by ANZ, CWB and Westpac. Inflation rate at 3.4% till January 2024, So Rate cuts mostly expected in Second half of 2024 and starting of 2025. So Australian Dollar will be rally till the second half of 2024.

RBA Likely to Maintain Interest Rates Amid Split Predictions on Future Cuts

AUDUSD is moving in Descending channel and market has reached lower high area of the channel

The Reserve Bank (RBA) is anticipated to keep interest rates steady at 4.35% in its upcoming meeting, according to Finder’s RBA Cash Rate Survey. While all 41 experts surveyed agree on the hold, opinions vary on the timing of rate decreases.

Half of the experts forecast the RBA’s first cut before September, while the other half expect it later. Additionally, one in four experts predicts no rate cuts until 2025.

With inflation stabilizing at 3.4% in the year to January, Finder’s Graham Cooke suggests that the cost-of-living crisis may be abating, indicating the effectiveness of the RBA’s rate hikes.

Regarding future rate cuts, Commonwealth Bank and Westpac predict the first cut in September 2024, while NAB and ANZ foresee cuts in November 2024 or the fourth quarter of the year, respectively.

Moody’s Analytics’ Harry Murphy Cruise suggests the RBA won’t adjust policy until September, citing the impact of tax cuts set for July. Conversely, Shane Oliver from AMP expects cuts to commence in June, anticipating three 0.25% cuts this year.

David Robertson of Bendigo Bank predicts a cautious stance from the RBA in March, with a move to a neutral position in May and no cuts until November at the earliest.

Since May 2022, the RBA has raised interest rates from record lows of 0.1%, implementing 13 rate hikes to the current 4.35%.

AUD: RBA Announcement Poses Downside Risks for AUD – ING

Economists at ING have conducted an analysis aimed at forecasting the potential impact of the upcoming Reserve Bank of Australia (RBA) meeting scheduled for Tuesday on the Australian Dollar (AUD).

Despite the possibility of some downside risks associated with the RBA announcement, particularly stemming from unexpected developments such as the CPI flattening in January, which remained at 3.4%, there are still factors supporting the RBA’s hawkish bias. While the stagnant CPI figure might raise concerns and potentially prompt discussions about rate cuts among policymakers, there’s skepticism regarding the likelihood of such actions being taken.

The RBA continues to find justification for maintaining its hawkish stance, notably due to its policy rate being lower compared to those of other major central banks. Additionally, recent recalibrations of global rate expectations towards a more hawkish direction contribute to this bias. Furthermore, there are persistent risks of a resurgence in inflation, which further supports the RBA’s cautious approach.

In light of these factors, analysts at ING express optimism about the Australian Dollar’s prospects, particularly anticipating a sustained rally in the AUD during the second quarter. They express confidence that the RBA’s stance is unlikely to impede this potential growth trajectory.

AUD: RBA Expected to Hold Rates, Economists Diverge on Timing for Cuts

AUDUSD is moving in Ascending channel and market has fallen from the higher high area of the channel

Reserve Bank Expected to Keep Rates Steady, but Debate Over Timing of Cuts Persists

Analysts are divided over when the Reserve Bank (RBA) will start easing interest rates as the central bank convenes its second board meeting of 2024 this week. The prevailing sentiment suggests the RBA will maintain its cash rate at 4.35%, a level it reached after gradual increases over time.

The slow ascent of interest rates in Australia, coupled with a relatively lower peak compared to similar economies, implies that the first rate cuts may not materialize until February 2025, according to independent economist Saul Eslake. Eslake attributes this cautious approach to the RBA’s willingness to tolerate inflation levels above its target range, a stance not mirrored by counterparts like the US Federal Reserve and the Bank of England.

However, all of the big four commercial banks forecast rate cuts from the RBA this year. The Commonwealth Bank of Australia (CBA) projects three 25 basis-point reductions by the end of 2024. Gareth Aird, head of Australian economics at CBA, highlights weak economic growth in the December quarter, particularly in consumer activity, as a factor necessitating rate cuts to bolster spending and curb rising unemployment.

The RBA’s governor, Michele Bullock, is expected to elaborate on the bank’s stance during a media briefing following the rates decision announcement. The prevailing consensus suggests rates will remain unchanged until September, with a projected cut to 4.1%. However, unions like the Australian Council of Trade Unions (ACTU) advocate for swifter cuts to combat inflationary pressures.

Nevertheless, factors like the impact of amended tax cuts from July 1 and the decision of the Fair Work Commission on award wages could influence the RBA’s decision-making process in the coming months. Despite differing viewpoints, the market awaits the RBA’s next steps amid evolving economic dynamics.

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