Consensus calls for a 25 basis point rate hike tomorrow
While the possibility of a pause cannot be ignored, I suspect the RBA is likely to raise rates by 25 basis points tomorrow as they do not meet until February.
What happened after the last RBA meeting?
- Nov. 10: Australia’s central bank says it’s nearing time to expect rate hikes (Reuters)
- The CPI fell to 6.9% y/y from 7.4% and below 7.5%, indicating that inflation has peaked.
- Governor Lowe reiterated his confidence that the economy could make a soft landing.
- The PMI index continued to decline, the business climate remained stable.
- Consumer inflation expectations are at an all-time high, according to the survey.
- The OIS curve is downward as the higher terminal speed case decreases.
The RBA cash rate is currently at 2.85% after raising rates for a record seven consecutive meetings by a total of 275 basis points. And despite trailing the RBNZ, the Fed and just about everyone else, the RBA still believes the final rate will remain lower than its peers.
By comparison, the RBNZ has an OCR of 4.25% and is expected to hit at least 4.5%, but a recent poll suggests the final RBA rate will be around 3.6% next year.
I expect the RBA to raise rates tomorrow for a record eighth meeting in a row by 25 basis points. However, we shouldn’t overlook the suspension option, which I’m sure consumers will love. However, they will likely go up to 3.1% because they won’t meet until February, so technically January is kind of a break. But a case for a break is certainly being built.
Some indicators of inflation expectations have eased, and the monthly inflation figure suggests that inflation peaked at 7.4% year-on-year, while it fell to 6.9% from an expected 7.5%. All 30 economists polled by Reuters expect the RBA to rise by 25 basis points tomorrow, but money markets currently rate only a 56% chance, meaning they have a 44% chance of taking a break.
AUD/USD analysis (4-hour chart)
The AUD/USD symmetrical triangle break remains in place on the 4-hour chart and prices returned to the support band following Friday’s NFP report. The next target for the bulls remains 0.69, so we hope prices can now hold above Friday’s low and move higher.
Source: StoneX
Matt Simpson, FOREX.com » Official site
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