RBA Preview: Seven major banks expectations

The Reserve Bank of Australia (RBA) will announce its Interest Rate Decision on 7 July 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 seven major banks regarding the upcoming central bank's meeting.


“The RBA is providing considerable stimulus to the economy through a range of policies and will continue to do so. Interest rates and policy settings will be unchanged in July. The cash rate is set to remain at its current level for a very long time – we assess until at least the end of 2023 although the 3yr bond target rate will likely be lifted during 2022.”


“The RBA meeting is unlikely to yield any material surprise or changes to the policy stance, and should, therefore, have a limited impact on the Aussie dollar. There is a chance that the RBA will want to change its relaxed stance on the relatively strong AUD: a simple acknowledgment (like the Reserve Bank of New Zealand did recently) that it is posing a hindrance to the economic recovery might be enough to trigger a mild negative AUD reaction.”

Standard Chartered

“We expect the RBA to keep the policy cash rate at the floor of 0.25% at its July meeting. Deputy Governor Debelle noted in a speech in June the RBA’s comfort with the success of its policies; while he acknowledged that the central bank might need to remain accommodative near-term, we believe the RBA will not ease further immediately. The recent spike in coronavirus infections in Victoria is a concern; the re-imposition of lockdowns might also hurt growth – the RBA is likely to watch these events cautiously. Controlled relaxation of social distancing measures in other parts of the country is also likely to lead to increased activity from June. The success of its YCC measures and likely improvement in domestic activity would enable the RBA to stay on the sidelines in the near-term.”


“There should be no surprises with the RBA keeping the cash rate on hold. The Bank is likely to reiterate it stands ready to provide liquidity as needed. This was backed by actions last month, the Bank injecting short term funds to offset the sizeable maturity of reverse repos in June. Expect significant liquidity over coming months as the Term Funding Facility is drawn down.”

Wells Fargo

“We look for the RBA to maintain a steady policy and expect the current cash target rate of 0.25% to remain at its current level for the foreseeable future.”


“The RBA decided to maintain the OCR at 0.25% and the 3-year Australian Government securities (AGS) yield target at 0.25% in June. We do not see further reductions in the OCR. In fact, it is likely the RBA will keep it on hold for an extended period. The focus will thus remain firmly on end-user rates via the yield curve target, as well as ensuring sufficient liquidity in bond markets and the free flow of credit to households and business.”


“We don’t expect any change in policy, with the Board continuing to say that it ‘is committed to do what it can to support jobs, incomes and businesses’ and that ‘this accommodative approach will be maintained as long as it is required.’ It will be interesting to see if the statement says anything about recent pandemic developments in Melbourne. There is no doubt that a resurgence is the biggest downside risk to the economic outlook. A return to widespread lockdown would have a material impact on GDP and employment. The blow to sentiment in such circumstances may be longer lasting than that from the first lockdown. It is unlikely that currency will be a feature in current commentary, given AUD/USD remains below 0.70.”


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