RBA May Hold Rates, Inflation Concerns Linger

London: 18 March 2024 (TraderMade): The Reserve Bank of Australia (RBA) will announce its interest rate decision tomorrow, 19 March 2024. Here's a breakdown of what to expect:

Key Takeaways

• No change in interest rates is expected on Tuesday.
• RBA might maintain a hawkish bias due to inflation concerns.
• Economic slowdown could influence the RBA's future decisions.
• Market reaction will depend on the RBA's tone and global cues.

Hold on Rates Likely

Financial experts overwhelmingly predict the RBA will maintain the current cash rate of 4.35%. This anticipation comes after a series of hikes in the past two years to combat inflation.

Inflation Remains a Focus

While inflation has shown signs of slowing down (currently at 4.1% annually), it remains above the RBA's target range of 2-3%. This scenario suggests the central bank may maintain a "hawkish bias," signaling a potential for future rate increases if inflation doesn't fall further.

Economic Considerations

A slowdown in the Australian economy, with GDP growth dropping to 0.2% in the last quarter, might limit the RBA's hawkish stance. The bank will need to balance controlling inflation with supporting economic activity.

Impact on Markets

A hold on rates, coupled with a hawkish tone, could limit further gains for the Australian stock market (ASX 200) and potentially lead to some profit-taking. The Australian Dollar (AUD) might benefit from hawkish signals, although uncertainty surrounding the US Federal Reserve meeting later this week could dampen any major moves.

Looking Ahead

While the RBA is likely to hold rates steady tomorrow, September remains the most likely time frame for a potential rate cut. However, the bank's stance will depend on future economic data and inflation trends.