Australia set to extend rate pause
Australia’s central bank is widely expected to hold interest rates at a 12-year high today as the economy shows signs of slowing further while unemployment trends higher.
Economists expect the Reserve Bank of Australia (RBA) will keep its cash rate at 4.35% for a third straight meeting, while maintaining a hawkish bias amid uncertainty over the strength of a disinflationary impulse.
The board meeting, the first for deputy governor Andrew Hauser, began yesterday with the decision to be released in Sydney today, followed by the governor’s press conference an hour later.
“We expect a slight tightening bias will be kept,” said Chris Read, a Sydney-based economist at Morgan Stanley.
“The governor will likely highlight how the data over the past six weeks has evolved broadly as expected and is consistent with continued progress towards the central bank’s targets.”
Australia’s policy announcement will likely come shortly after a decision by the Bank of Japan (BOJ), which may raise rates today for the first time since 2007 following solid outcomes in wage negotiations.
Tomorrow, the US Federal Reserve (Fed) will probably release an on-hold decision.
RBA governor Michele Bullock will be mindful of global inflationary trends, with price pressures in the United States, in particular, abating only gradually.
That has led Fed chairman Jerome Powell to say he and his colleagues aren’t ready to cut rates yet.
Australian policymakers have also pushed back against bets on near-term easing, reflecting concerns that inflation remains well above the 2% to 3% target and is only forecast to return to the goal range at the end of 2025.
Economists, who broadly see a first-rate cut in the second half of the year, expect today’s statement to stay hawkish as inflation remains sticky.
Another reason to keep talking tough is the hot property market.
Bullock and her colleagues would be loathed to further fuel home prices, which have been on an upswing driven by a supply shortage and strong population growth.