Credit Agricole anticipates the RBA will hold rates at this week’s meeting, with Australian inflation and activity data aligning with forecasts, supporting a continued hawkish stance relative to other G10 central banks. Despite stable inflation and moderate retail activity, the RBA is expected to maintain a neutral outlook, with rate cuts not likely until early 2025.
Key Points:
- Inflation in Line with Forecasts: Trimmed mean inflation is at 3.5% YoY, aligning with RBA projections and showing a decrease from 4.0% YoY, reducing pressure for policy shifts.
- Moderate Consumption Growth: Retail sales adjusted for inflation rose 0.5% QoQ in Q3 but remain below the RBA’s 1.5% YoY forecast for H2 2024, reflecting restrained consumer spending.
- Neutral Outlook Expected: The RBA is likely to maintain its neutral stance, indicating it is open to either hikes or cuts, though rate cuts are not expected until February 2025.
- AUD Support: With the RBA lagging other G10 banks in easing cycles, AUD finds underlying support from this relatively hawkish positioning.
Conclusion:
Credit Agricole expects the RBA to stay on hold this week, maintaining a neutral yet hawkish stance as inflation trends align with forecasts. The bank’s cautious approach to rate adjustments contrasts with other G10 central banks, potentially offering continued support for the AUD in the near term.
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