RBA Preview: Forecasts from seven major banks, focus on hints about upcoming decisions

The Reserve Bank of Australia will announce its decision on monetary policy on Tuesday, March 1 at 03:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of seven major banks regarding the upcoming central bank's decision. The RBA will likely maintain its benchmark rate at 0.1% while inflationary pressures and wage growth take center stage.

Westpac

“The cash rate will be held at the record low of 0.1%. The focus will be on any shift in language in the decision statement. We expect the tightening cycle to begin this August. We anticipate that by August, with the benefit of two further readings on inflation as well as updates on unemployment and wages, the case will be made for the tightening cycle to commence.” 

Standard Chartered

“We think the RBA is unlikely to deviate too much from its February guidance given that the last meeting saw quite a few updates. In addition, the central bank may add geopolitical tensions to its list of uncertainties. If the central bank drops its reference ‘to be patient’ on rate normalisation, it would be a hawkish surprise. We currently expect the RBA to start hiking rates in August.”

ING

“The RBA will hold its policy cash rate target at 0.1%. Wages growth, which is the only missing criterion standing in the way of a rate hike, came in at 2.3% YoY in 4Q21. This is lower than the 3% rate which would be consistent with sustained inflation in the RBA’s 2-3% target range. Despite the tightness of the labour market, this has not yet trickled through substantially to wages growth. The RBA’s 3% threshold for wages may not be met until the 2Q22 wage figures are released in the second half of the year.”

Danske Bank

“We expect the RBA to continue pushing against the very hawkish market pricing, especially following modest Q4 wage growth data.”

SocGen

“We expect the cash rate target to remain at 0.10%. Though we don’t expect the RBA policymakers to give any clear hints on the timing of the first-rate hike at the March meeting, we believe that the RBA’s official statements and speeches support our base scenario of a rate hike in 3Q this year. In addition, we believe that the contraction in the RBA balance sheet (i.e. the decision to stop the reinvestment of the matured bonds) will come after the first rate hike. The RBA is likely to decide to reinvest the proceeds of the matured bonds in May in order to minimise any adverse impacts on the financial markets.”

Citibank

“RBA Board meeting Citi cash rate forecast; 10bps, Previous; 10bps – this week’s RBA Board meeting will be framed against the context of easing COVID-19 restrictions, recent data showing only modest wages growth, the likelihood of a slower GDP growth rate at the end of 2021 than expected by the Bank and conflict between Russia and Ukraine. Given recent communication from the RBA about remaining patient, this should keep it treading a neutral path and making very little in the way of changes to the monthly policy statement. The measured and neutral policy guidance from the RBA will stand in stark contrast to the more hawkish guidance provided by the RBNZ.”

TDS

“We expect no changes to policy settings, the target cash rate staying at 0.10%. The Q4'21 wages report was largely in line with the RBA's forecast, so the Bank is likely to reiterate it remains 'patient' as the pick-up in wages growth is expected to be 'gradual'. Unfolding Ukraine-Russia tensions are unlikely to rate a mention. The Q4'21 wages outcome makes a Jun'22 hike less likely. It's more likely the RBA shifts to a hawkish stance at that meeting and delivers a hike in Aug as we expect. AUD risks are skewed higher if the outcome leans more hawkish than dovish.”