The Reserve Bank of Australia (RBA) is expected to keep the Official Cash Rate (OCR) at 4.35%, a 12-year high. The number of monetary policy meetings will be reduced in 2024 from eleven to just eight times a year, giving the Board more time to assess economic developments. Since the December decision, inflation has decreased while growth remains tepid, justifying market expectations of no change in the OCR.
With no anticipated changes in the OCR, focus will be on the RBA’s accompanying statement and Governor Michele Bullock’s press conference. The RBA has noted a decline in inflation and softening economic activity as the base case for the January decision. However, most economists do not expect changes to the statement wording, with policymakers maintaining the possibility of additional rate hikes if needed. This will have implications on the AUD/USD pair, which currently trades at its lowest levels, indicating a possible downward extension.
The decision on the interest rate will have an impact on the Australian Dollar (AUD), with expectations of under pressure if policymakers express a more dovish tone, while retaining the hawkish stance may not give fresh impetus to the Aussie. The unemployment rate has remained steady at 3.9%, and while Governor Bullock has warned about the upside risks of inflation, the cautious tone is expected to persist. Overall, the decision will likely set the tone for the Australian Dollar in the coming months, influencing potential USD pair movements.