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?
Start investing today or test a free demo
Open account Try 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
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
