RBA to scrap QE on February 1, wait with rate hikes till November – Reuters poll

"Australia's central bank will end to its bond-buying programme on Tuesday, but is expected to wait till this November before it responds to higher inflation with its first interest rate rise in over a decade,” per the latest Reuters poll.

Key quotes

The poll showed inflation would meet the RBA's target range of 2-3% from next quarter and through 2023 averaging at 2.5% this year and 2.3% in 2023, while the economy is forecast to grow 4.0% this year and 2.9% in 2023.

Economists canvassed in a Reuters Jan 18-25 poll also brought forward their rate hike expectations for third month in a row. Most of the 34 respondents, however, expect the RBA to take more time, with a median forecast for a 15 basis-point move in November.

Two economists expect a rate rise already in the second quarter, seven in the third quarter, 11 in the fourth quarter and 13 still see the central bank first pulling the trigger next year.

Economists were less divided on when the central bank will pull the plug on its bond-buying program, with 17 out 22 of those who answered the question expecting an announcement at the next policy meeting on Feb. 1.

Five others saw the central bank ending the program launched in response to the coronavirus pandemic in May.

The last time the central bank raised rates was more than a decade ago, in Nov. 2010, when it lifted rates to 4.75%.

An expected hike this November would be followed by a 25 basis point increase in the first quarter of next year and another 25 basis points in the June quarter, taking the cash rate back to 0.75% where it was before the pandemic.

FX implications

AUD/USD defended 0.7100 mark, around 0.7120 by the press time, following the hawkish survey results. However, Fed’s rate hike signals and cautiously optimistic Powell tames the Aussie bulls.

Read: AUD/USD defends 0.7100 after Fed showdown, focus shifts to US GDP