The board of the Reserve Bank of Australia (RBA) will meet once more on Tuesday to contemplate hiking, holding, or cutting the cash rate, having now kept it steady for three consecutive months.
Economists at the big four banks have expressed their certainty that the October meeting will result in another pause in light of recent data.
The Consumer Price Index (CPI) – Australia’s inflation measure – rose to 5.2% over the year to August, the Australian Bureau of Statistics (ABS) revealed this week.
That’s higher than July’s read of 4.9% but isn't expected to worry the central bank.
"When excluding these volatile items [fuel, fruit and vegetables, and holiday travel] from the monthly CPI indicator, the annual rise of 5.5% in August is lower than the annual rise of 5.8% in July," ABS head of price statistics Michelle Marquardt said on Wednesday.
The latest monthly CPI data isn’t the only release that likely eased the minds of the RBA board this week.
The ABS also found retail trade slowed in August, rising 0.2% month-on-month compared to July’s 0.5% lift.
"The modest rise in August shows consumers continued to restrain their retail spending,” ABS head of retail statistics Ben Dorber said on Thursday.
Ultimately, the central bank wants consumer spending to slow enough to drive inflation down to its target level of between 2% and 3%.
Though, economists have suggested RBA will likely hold off on making any major move for the time being as it waits for the more comprehensive quarterly CPI read – to be released late next month.
What do economists at the big four banks expect?
Economists at each of the big banks predict the cash rate will remain on hold on Tuesday.
Here’s what they’ve recently said on the matter:
| Westpac | CommBank | ANZ | NAB |
| “The board meetings which occur immediately before the release of the quarterly inflation report and the updating of [RBA] staff’s forecasts (namely those in April, July and October) have been ones where the Board has shown a preference to pause – even during this long tightening cycle,” Westpac chief economist Bill Evans said. | “In what will be Michele Bullock’s first meeting as Governor, we have a high conviction that rates will be left on hold for the fourth consecutive month,” CommBank economist Harry Ottley said. | “For now, we still see the RBA on an extended pause, but signs inflation might be running a little higher than expected are consistent with the risk we have been highlighting, namely if the RBA moves this year or early next rate rises are more likely than cuts,” ANZ Research said. | “We continue to see one further hike by the RBA – likely in November,” NAB Group Economics said. “The recent run of activity data suggests there may be some downside risk to this, but the resilience in the labour market and potential for ‘sticky’ services still present an upside risk.” |
As of yesterday, the RBA Rate Tracker, provided by the ASX, suggested a 93% chance rates will be held on Tuesday and a 7% chance they will be lowered.
CommBank expects rate cuts to happen earlier than the other big four banks, despite having pushed back its expectations for the first rate cut from March to May.
“Weighing up the recent data flow and global developments … we have shifted our base case to expect the monetary policy easing cycle by the RBA to get underway at the 6-7 May 2024 board meeting,” CommBank chief economist Stephen Halmarick said this week.
“By May 2024, the RBA will have in hand a number of data points that will support the start of a modest easing cycle.”
Westpac and NAB, on the other hand, aren’t expecting a cut until mid-2024, with the former tipping the first to occur at the August meeting.
ANZ expects rates to fall in late 2024.
Image by Shutterstock.
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