RBA Preview: Forecasts from eight major banks, fairly low surprise potential

The Reserve Bank of Australia (RBA) will announce its decision on monetary policy on Tuesday, October 5, at 05:30 GMT. As we get closer to the release time, here are the forecasts by the economists and researchers of eight major banks regarding the upcoming central bank's decision. All policy settings are likely to be unchanged.

The AUD/USD pair is recovering ground ahead of the event and could extend its gains once above 0.7330, according to FXStreet’s Chief Analyst Valeria Bednarik.

ING

“The RBA is not expected to change policy rates. With the US Fed creeping closer to formally signalling a 2022 liftoff, the RBA has been clear to distance itself from this slippage and is sticking firmly to its ‘nothing until 2024’ message – a message financial markets have largely been ignoring.”

Westpac

“The RBA Board meeting for October is not expected to see any changes to policy settings. The Governor in his speech on September 14 confirmed that ‘the Board will not increase the cash rate until actual inflation is sustainably within the 2-3% target range’. He added that’ we want to see inflation around the middle of the target range’. Just how quickly inflation will return to the target range will be a key debate and focus in 2022. Westpac remains of the view that rates are likely to rise in 2023, ahead of the timing currently envisaged by the RBA and a timing more in line with other central banks.”

ANZ

“We think the October statement will be a bit of a non-event after the August and September statements had to deal with the Delta lockdowns and what to do about the bond taper.”

Standard Chartered

“The central bank rhetoric is likely to continue to reflect the bias of the September policy meeting statement and minutes and the RBA governor’s speech. On growth, the RBA is likely to maintain the view that the current COVID outbreak would delay but not derail the recovery outlook, especially as the vaccination pace remains encouraging, although it has moderated its confidence in the strength of the rebound. On inflation, the central bank has been of the view that employment and wages need to be a lot stronger to generate sustainable inflation of 2-3% and that rate hikes are unlikely before 2024. We will closely watch any change in tone on areas such as the growth outlook amid a pickup in vaccinations.”

TDS

“This meeting should be uneventful and all policy settings should remain unchanged. Developments since the Sep meeting are unlikely to alter the Bank's stance – health and economic challenges pose near-term risks but re-opening is a reason for optimism. On housing, the RBA is likely to mention regulators have commenced formal discussions to introduce macroprudential policies.”

Deutsche Bank

“We are expecting no change in policy and a reaffirmation of their dovish policy outlook.”

SocGen

“The RBA is unlikely to bring any changes to its current monetary policy settings at the October meeting. The target for the cash rate and 3-year government bond yields (for the April 2024 bonds) will be maintained at 0.10%. Most importantly, it is difficult to find any reasons as to why the policymakers should modify the tapering of the government bond purchase programme that was announced and implemented at the September meeting. The RBA will likely repeat that it will continue bond purchases at the rate of AUD4bn a week until at least mid-February 2022.”

Citibank

“The October RBA Board Meeting is expected to be fairly straightforward, where all policy levers are expected to remain unchanged. We expect the Governor’s statement to repeat the phrase that ‘It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range. The central scenario for the economy is that this condition will not be met before 2024’.” 

See: AUD/USD to extend its advance towards 0.7480 on a break above 0.7315 – SocGen