RBA Expected to Hold Rates Steady Amid Economic Uncertainties
BY TIO Staff
|septembrie 23, 2024The Reserve Bank of Australia (RBA) is widely anticipated to keep the cash rate unchanged at 4.35% in its upcoming meeting on Tuesday 24th September. This decision, supported by the majority of economists and market analysts, reflects the bank's cautious stance amid persisting economic uncertainties. Key indicators such as inflation rates, employment figures, and global economic conditions play crucial roles in shaping the RBA’s monetary policy outlook.
The Reserve Bank of Australia's (RBA) decision to hold the cash rate at 4.35% is supported by the consensus among market analysts and economists. Out of 45 economists surveyed, 40 expect the rate to remain steady throughout 2024. The median expectation suggests a potential 25 basis point cut in the first quarter of 2025. This forecast stems from a combination of stable inflation rates and a robust employment landscape.
Economic Indicators Influencing RBA’s Decision
Inflation rates in Australia have shown signs of slowing, dropping to 3.5% in July. However, this figure remains above the RBA's target range of 2-3%, prompting the bank to maintain its current rate. The strong jobs market further supports this decision, as a high employment rate mitigates the pressures of inflation, allowing the RBA to adopt a wait-and-see approach.
The RBA's stance is also influenced by global economic trends. Compared to other major central banks like the Federal Reserve, the Reserve Bank of New Zealand, the Bank of England, and the Bank of Canada, the RBA has been more conservative in adjusting its rates. While these banks have already initiated rate cuts, the RBA prefers to hold its position until there is more clarity on the inflation trajectory and other economic indicators.
Market Reactions and Predictions
Investors are keenly observing the RBA's press conference for any hints on future monetary policies. The Australian dollar's performance against the US dollar (AUD/USD) is particularly sensitive to these announcements. Speculations about the RBA's dovish stance, combined with US inflation data, are expected to drive the AUD/USD volatility.
According to data from Trading Central on our economic calendar, when the actual data matched the forecast:
- The price change on the AUDUSD for the past 8 events ended bearish 63% of the time, over a 4 hour period after the announcement.
- The average price range for the AUDUSD over a 4 hour period after the announcement was about 40 pips.
Future Rate Cuts on the Horizon?
Looking ahead, most economists anticipate the RBA to begin cutting rates in early 2025. The forecast includes 25 basis point reductions in the first three quarters of 2025, which would bring the cash rate down to approximately 3.60% by the end of the year. This gradual approach aims to balance the need for economic stimulus with the risk of sparking higher inflation.
The expected narrowing of the interest rate differential between Australia and the US is another factor that could influence the AUD/USD exchange rate. As the US Federal Reserve is also speculated to cut rates, the relative attractiveness of the Australian dollar may diminish, potentially pushing the AUD/USD pair towards $0.70.
Conclusion
The Reserve Bank of Australia's decision to keep the cash rate steady at 4.35% reflects a cautious approach amid ongoing economic uncertainties. While inflation has moderated, it remains above the target range, and the robust job market supports the current rate. Market analysts and economists predict that the RBA will maintain this rate throughout 2024, with potential cuts in 2025. Investors will closely monitor future economic indicators and global trends to gauge the RBA's next moves, particularly in relation to the AUD/USD exchange rate. As the economic landscape evolves, the RBA's decisions will continue to play a crucial role in shaping Australia's economic future.
Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Never deposit more than you are prepared to lose. Professional client’s losses can exceed their deposit. Please see our risk warning policy and seek independent professional advice if you do not fully understand. This information is not directed or intended for distribution to or use by residents of certain countries/jurisdictions including, but not limited to, USA & OFAC. The Company holds the right to alter the aforementioned list of countries at its own discretion.
TIOmarkets offers an exclusively execution-only service. The views expressed are for information purposes only. None of the content provided constitutes any form of investment advice. The comments are made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.
Join us on social media
Behind every blog post lies the combined experience of the people working at TIOmarkets. We are a team of dedicated industry professionals and financial markets enthusiasts committed to providing you with trading education and financial markets commentary. Our goal is to help empower you with the knowledge you need to trade in the markets effectively.
Related Posts
undefined