The Reserve Bank of Australia (RBA) is expected to maintain its current monetary policy stance, according to analysts. The RBA’s statement, due at 2.30pm Sydney time, is likely to highlight that the labor market is still tight but easing and that inflation remains high. In addition, analysts speculate that the statement may mention the impact of higher petrol prices on consumers’ inflation expectations. Despite the recent increase in services inflation and the risk of prolonged high inflation, the RBA is expected to wait for confirmation in the full Q3 CPI report before taking any action.
Analysts predict that the new RBA Governor’s first meeting will result in no change to the current monetary policy. The RBA may wait until the release of the full Q3 CPI report on October 25 before making any decisions. The last RBA Minutes indicated a potential hike in interest rates based on expectations of persistently high inflation and poor productivity growth. This risk seems to be materializing, with GDP per hour returning to 2016 levels and services inflation remaining sticky. Given these factors, NAB forecasts a rate hike to 4.35% in November.
In summary, the RBA is expected to adopt a cautious approach and maintain its current policy stance. The central bank may note in its statement that the labor market is loosening and inflation remains high. Potential impacts from higher petrol prices on consumers’ inflation expectations may also be mentioned. With persistently high inflation and poor productivity growth, an interest rate hike may be on the horizon in November, according to NAB. However, the RBA is likely to wait for further confirmation in the upcoming Q3 CPI report before taking any action.
