The Reserve Bank of Australia rate decision is due today at 03:30 GMT. The central bank is widely expected to keep interest rates unchanged at the record low of 1.5 percent.
A lot has changed since we last heard from the RBA. To start with, both the domestic and global economic conditions have weakened since early December. The Fed, in response to the recent slowdown, has turned dovish.
Big Australian banks like the NAB have announced an out-of-cycle mortgage rate hike, triggering speculation that the resulting slowdown in the housing market would force the RBA to cut rates. And last but not least, the rate market is pricing a 25 basis point rate cut by the end of December.
The central bank will likely downgrade its growth and inflation forecasts for this year and acknowledge the deteriorating conditions in the housing market. However, investors positioned for an outright dovish turn may be left disappointed.
A vast majority of economists believe the central bank will stick to the script – reiterate that the next move in rates could be on the higher side. As a result, the AUD may jump few ticks.
The AUD, however, could take a beating in case the central bank says the next move in rates could be up or down. That would reinforce market expectations of a rate cut before the year-end.
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About the RBA rate decision
RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.
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