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The Reserve Bank of Australia (RBA) is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.<\/p>\n
The RBA is widely expected to hold the Official Cash Rate (OCR) at 4.35% following its September monetary policy meeting. The decision will be announced at 04:30 GMT, with Governor Michele Bullock\u2019s press conference to follow at 05:30 GMT.<\/p>\n
Economists and industry experts unanimously expect the central bank to hold the policy rate yet again after RBA Governor Michele Bullock clearly said in her speech at the Anika Foundation earlier this month that \u201cthe board does not expect to be in a position to cut rates in the near term.\u201d.<\/p>\n
Bullock argued that inflation pressures, particularly in home construction, insurance and the rental market, continued to be high in some parts of the economy even though Australian Treasurer Jim Chalmers voiced concerns that interest rates have \u201csmashed\u201d the economy.\u00a0<\/p>\n
Australia\u2019s economy, however, added more jobs than expected in August as the Unemployment Rate remained steady at 4.2%, the Australian Bureau of Statistics (ABS) reported on September 19. Strong Australian employment data indicated the labor market resilience, in the face of a slowing economy, supporting the RBA\u2019s view that an interest-rate cut appears less likely in the short term.<\/p>\n
RBA Assistant Governor (Economic) Sarah Hunter said earlier this month that \u201cthe labor market is still tight relative to full employment.\u201d She added that the bank \u201cviewed current conditions to be \u2018above\u2019 full employment with jobless rate needing to rise to ensure inflation\u2019s retreat continued.\u201d<\/p>\n
Further, the RBA is unlikely to act until the release of the critical Consumer Price Index<\/a> (CPI) data for Q3, due on October 30, which could validate the central bank\u2019s progress on inflation.<\/p>\n Previewing the RBA policy decision, analysts at TD Securities (TDS) said: \u201cRBA communication and the run of data since the Bank’s August meeting provides no compelling reason for a shift in stance at this week’s meeting, ruling out a rate cut this year.\u201d<\/p>\n The Australian Dollar (AUD) is trading close to the highest level in eight months against the US Dollar (USD) heading into the RBA event risk. The ongoing uptrend in the AUD\/USD pair<\/a> could be mainly attributed to the divergent monetary policy outlooks between the US Federal Reserve (Fed), which has just started its easing cycle, and the RBA.<\/p>\n The Fed announced a 50 bps rate reduction at its September meeting last week, bringing the fed<\/a> funds rate to the range of 4.75%-5.0%. In contrast, markets expect the RBA to go for the first 25 bps rate cut to 4.10% only by February 2025, according to the ASX RBA Rate Tracker.<\/p>\n If RBA Governor Bullock<\/a> sticks to her hawkish rhetoric by reiterating that \u201cit is premature to be thinking about rate cuts,\u201d AUD\/USD could extend the ongoing uptrend to test the 0.6900 threshold.<\/p>\n Alternatively, the pair could come under intense selling pressure and target the 0.6700 level in case Bullock acknowledged the economic slowdown, which could contribute to easing price pressures in the coming months.<\/p>\n With a no-rate change decision already a given, the language in the policy statement and Bullock\u2019s remarks during the press conference are likely to grab the eyeballs and offer a fresh directional impetus to the Aussie traders.<\/p>\nHow will the RBA interest rate decision impact AUD\/USD?<\/h2>\n