Credit Agricole is predicting that the Reserve Bank of Australia (RBA) will keep interest rates steady during the upcoming meeting. This decision is based on the fact that Australian inflation and economic activity data are in line with expectations, which supports the RBA’s current hawkish stance compared to other G10 central banks.
One key point to note is that trimmed mean inflation is currently at 3.5% year-over-year, which matches the RBA’s projections. This figure has decreased from 4.0% year-over-year, which helps alleviate pressure for any immediate policy changes. Additionally, retail sales adjusted for inflation saw a 0.5% quarter-over-quarter increase in Q3. However, this growth is still below the RBA’s forecast of 1.5% year-over-year for the second half of 2024, indicating that consumer spending remains somewhat constrained.
It is expected that the RBA will maintain a neutral outlook during the meeting, signaling that they are open to both interest rate hikes and cuts. However, it is unlikely that any rate cuts will occur until February 2025. This cautious approach by the RBA contrasts with the actions of other G10 central banks, providing support for the Australian Dollar (AUD).
In conclusion, Credit Agricole anticipates that the RBA will keep rates unchanged this week, continuing to adopt a neutral yet somewhat hawkish stance as inflation trends stay on track with forecasts. This conservative approach to monetary policy may help bolster the AUD in the short term.
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