RBA preview: hike widely expected today, but Deutsche Bank tips a surprise hold
Earlier:
- Deutsche Bank stands alone with RBA hold call as 31 of 32 economists tip a hike
- JPMorgan joins hike call for RBA’s November meeting, sees tightening bias persisting
- RBA set for fifth 2026 hike to 4.85% as banks flag risk of another move in February
- ING lifts AUD/USD target to 0.71 as it backs a 25bp RBA hike next week
- RBA set for back-to-back hike after hot CPI, says Natixis’ Garcia Herrero
The Reserve Bank of Australia announces its latest policy decision at 2:30pm Sydney time on Tuesday (0330 GMT, 2230 US Eastern on Monday), with markets and economists overwhelmingly expecting a fifth rate increase this year.
Of 32 economists polled by Reuters, 31 forecast a quarter-point hike that would take the cash rate to 4.85% from 4.60%, its highest level in nearly two decades. Australia’s big four banks are among them, as is JPMorgan, which argues that senior RBA officials have signalled that inflation is not yet under control. Markets price around an 85% chance of a move after September-quarter inflation ran at an annual 3.7%, well above the bank’s target.
Deutsche Bank stands alone among major forecasters in expecting a hold. Its chief economist for Australia, Phil O’Donoghue, argues that inflation is tracking the RBA’s own forecasts, that unemployment has already risen to 4.7%, and that the full percentage point of hikes delivered so far is biting. He believes the board can wait until December, when it will have fourth-quarter inflation data and a clearer view of oil prices after the US midterm elections. Deutsche forecasts Brent falling to $90 a barrel by early next year. O’Donoghue has urged the board to reach its own conclusion rather than follow the market “echo chamber”, pointing to the Reserve Bank of New Zealand’s surprise hold last week.
This is a forecast meeting, so the decision will come with an updated Statement on Monetary Policy and new projections for inflation, growth and unemployment. Governor Michele Bullock’s press conference follows at 3:30pm Sydney time. With a hike largely priced in, a hold would be the bigger surprise for the Australian dollar and short-dated bonds. If the board does move, its guidance on whether further tightening is needed will be the main focus.
This article was written by Eamonn Sheridan at investinglive.com.