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The Reserve Bank of Australia (RBA) is having a monetary policy meeting this Tuesday and will unveil its decision at around 1:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of nine major banks regarding the upcoming central bank’s decision. 

The central bank is expected to maintain rates on hold at 0.1% and the bond-buying program unchanged, after boosting it in February by A$100 billion from mid-April. Meanwhile, AUD/USD is correcting lower, but the long-term bullish case remains intact.

Capital Economics

“The Reserve Bank of Australia will keep policy settings unchanged at the meeting on 2 March and will probably push back against mounting expectations of policy tightening.”

Standard Chartered

“We expect the RBA to keep policy rates on hold. The RBA has mentioned several times that negative rates are unlikely; as such, we do not expect more rate cuts. Any further easing is likely to come via unconventional measures and we do not expect easing near-term. We expect the RBA to extend QE purchases at least until end-2021, but we expect any such extension to be announced only in Q3. The central bank is also likely to maintain its yield curve control (YCC) target, but transition to purchasing more 2Y than 3Y bonds over time; however, it is unlikely to explicitly shift its YCC target in 2021.”


“We expect no change in the policy settings and confirmation of the conclusion of the February Statement. In February, the Board noted it ‘will not increase the cash rate until actual inflation is sustainably within the 2-3% target range.’ For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest.”


“There has been some speculation in the media that the RBA may announce an increase in the size of the QE program. We don’t think this is likely at this point, though it can’t be ruled out. We think the initial step Would be to strengthen the language around bond purchases. The RBA’s language around the rise in the AUD may also change somewhat, possibly expressing the view that the gain in the AUD is not helpful for the economic outlook.”


“Market chatter has intensified around the prospect of the RBA pulling the pin on Yield Curve Control – we believe this is grossly premature. We expect the Bank to reaffirm its commitment to the program at next week’s meeting by reasserting it does not expect to meet its inflation and labour market objectives until at least 2024, reinforcing YCC as a key policy tool.”


“RBA is expected to keep rates steady at 0.10%. Nevertheless, the RBA needs to push back harder at the continued rise in interest rates. It will likely pledge stronger action to maintain YCC and may promise to increase QE as needed in the coming months. One extreme possibility is that the RBA does what the BoJ did and simply drops any numerical limits on QE. Under pure YCC, purchases should be flexible and open-ended, not numerically limited. This is a much stronger statement from the bank, though it will not really involve any change to the YCC program.” 


“The RBA is likely to follow the cues of the Fed and the ECB in attempting to talk down both bond yields and the AUD. It may even bolster the size of its QE programme. While the RBA may be able to manufacture a softer tone in the value of AUD/USD in early March, the aussie is likely to remain well supported as long as reflation is dominating market attention.”


“So far, the RBA’s rhetoric has reinforced our view that it will hold off bringing the policy rate into negative territory (for now). We thus look for the OCR to remain unchanged at 0.10%. Although the outlook has improved, the pandemic has still been a large hit to the economy such that exceptionally easy policy is warranted. On the term funding facility (TFF), we think the RBA could let it end at its scheduled date of June 2021.”


“RBA is unlikely to tweak any of its major policy instruments, following February’s announcement of an extension of its LSAP program (asset purchases) by $AU100 B when it expires in April. The RBA is likely to reinforce its commitment to continue defending its 3Yr YCC target. We maintain the RBA will likely commit to additional LSAP later this year and is unlikely to prematurely exit its YCC target, but instead, possibly roll forward to purchasing the November 2024 bond which would be a de-facto extension of forward guidance on the cash rate.”


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