RBA Preview: Five major banks expectations

The Reserve Bank of Australia (RBA) will announce its Interest Rate Decision on 1 September at 04:30 GMT. The market consensus is for the RBA to stay on hold and as we get closer to the release time, here are the expectations forecast by the economists and researchers of five major banks regarding the upcoming central bank's meeting.

More – RBA Preview: No changes to leave AUD/USD at 0.74 – TDS

Standard Chartered

“We expect the RBA to keep the policy cash rate at the floor of 0.25% at its September meeting. The central bank announced a slew of policy measures in an intermeeting announcement in mid-March, reducing the policy cash rate to the 0.25% floor, and announcing QE, yield curve control (YCC) and a term funding facility. The RBA’s YCC has worked well in anchoring 3Y interest rates; it restarted bond purchases in August, to provide further monetary easing after the re-imposition of lockdowns in Melbourne. We believe the hurdle for further rate cuts or a modification of YCC is high; the success of its YCC measures would enable the RBA to stay on the sidelines in the near-term.” 

Westpac

“The RBA is expected to keep policy settings unchanged at its September meeting. The Bank is providing support to the economy through a range of stimulus policies and will continue to do so for the foreseeable future. The key elements have been: 1) lowering the cash rate to 0.25%; 2) targeting the 3-year government bond rate at 0.25%; 3) market operations, as needed, to provide ample liquidity to the banking system; 4) a Term Funding Facility for the banking system providing 3-year funding at 0.25%; and 5) Setting the rate paid on Exchange Settlement balances at the RBA at 10bps. Persistently poor economic outcomes – growth well below trend, high unemployment, and inflation below the bank's 2–3% target – mean the RBA will need to maintain these policies for an extended period and may come under pressure to do more in the future. For now, though the bank is of the view that monetary policy is doing ‘what it can’.”

ING

“We expect the RBA meeting to be – in line with market expectations – a relatively unremarkable event as we expect no change to the cash rate target of 0.25%. The Bank is likely in a good spot in terms of the monetary stimulus that has already been deployed to assist the fiscal efforts against the pandemic shock. The fall-out of the lockdown in Victoria will likely be in focus and Governor Lowe may once again highlight the serious economic damage for the whole country. The lack of hard data to back any policy shift suggests a wait-and-see approach should prevail, but more downbeat comments on the economic recovery prospects may deliver a short-lived negative impact on AUD.”

TDS

“The RBA Meeting should pass without any major surprises. The Bank is likely to assert that uncertainties remain high especially in light of the Covid-19 developments in Victoria. The RBA noted the downturn is not as severe as earlier expected and a recovery is underway in most of Australia. We expect the RBA to indicate this still remains the case.”

Citibank

“Citi’s cash rate forecast: 0.25%. We expect the statement to point to heightened uncertainty and downside risks, particularly in relation to the Melbourne lockdown. We also expect the RRBA to increase its bond purchases for the first time since May.”