RBA Preview: Forecasts from eight major banks, no change in rates, hiking in November?

We expect the RBA to keep rates on hold at 4.10% for a fourth consecutive meeting. On balance, we keep our call for one more 25 bps hike in November.

We expect another hawkish pause. The post-meeting statement will likely note the labour market is still tight but easing and that inflation remains too high. We suspect higher petrol prices and the associated upside risks to consumers’ inflation expectations will also rate a mention.

Michele Bullock presides over her first RBA meeting as Governor and we don't expect her to rock the boat, leaving the cash rate on hold. This board meeting presents her first chance to make changes to the Statement. If there are changes or a re-wording of the Statement we are not expecting radical shifts, but expect the Statement to reiterate further tightening may be required. While the Bank did acknowledge that ‘the process of returning inflation to target could be uneven’, we will look for any clues that the run-up in oil prices is impacting the Bank's inflation forecasts and inflation expectations prompting a hike by year-end. RBA should offer AUD some tailwinds. 

We expect the RBA will leave the cash rate unchanged at 4.10% – for the fourth consecutive month. The RBA’s next policy move will likely be in the second half of 2024, where we expect inflation will be approaching the top of the target range and there will be clear evidence of a weakening economy – in our view, warranting a shift towards rate cuts beginning in Q3.

The latest CPI figure for August stands at 5.2% YoY, the first increase since April and still way above the RBA’s target of 2-3%. However, it should not be too much of a concern as the rise in inflation was largely due to base effects and soaring oil prices. While we believe that the latest inflation figures bolster the case for the central bank to further increase rates at some point, we don’t think that it will choose this meeting to tighten.

We continue to believe that the RBA will keep policy unchanged, although we are penciling in a chance that it will hike one last time this year, taking the cash rate target to a peak of 4.35%. In terms of timing, this is likely to occur at the 7 Nov meeting, following the release of the 3Q23 CPI on 25 Oct. Another factor that could prompt the RBA to hike once more is the risk that wages in the third quarter could spike higher after a large mandated increase in the minimum and award wages.

The new Governor Michele Bullock’s first Monetary Policy Board Meeting is unlikely to deliver a change in the cash rate. The data since the September meeting has broadly been in line with expectations, although the Q2 National Accounts once again showed rising unit labor costs and falling productivity growth. Instead, the Board is likely to want to wait until the final quarterly CPI reading at the end of October before changing its forecast. But there could be hawkish risks to the Statement given the Fed’s hawkish signaling and higher oil prices potentially leading to a pick-up in inflation expectations, while services inflation remains sticky.

While economic data have been somewhat firmer over the past month, we don't believe the data have been firm enough to prompt a policy adjustment as yet, and we expect the RBA to keep its policy rate at 4.10%.