The Reserve Bank of Australia (RBA) is expected to maintain the cash rate at its upcoming meeting, with analysts predicting a shift towards less dovish messaging from Governor Michele Bullock. This change in communication suggests that potential rate cuts may be further away than previously anticipated by market traders. Several factors, including stronger-than-expected GDP figures, a resilient labour market, and rising service prices, indicate that inflation risks remain a concern for the central bank. Economists widely anticipate the RBA to hold the cash rate steady at 3.6 per cent.
Bond pricing currently indicates a reduced probability of a rate cut in November, down to approximately 40 per cent from a previous 64 per cent. The latest employment data also introduces uncertainty, with an unexpected decrease of 5400 jobs in August, contrary to the forecasted gain of 21,000. However, the jobless rate remained steady at 4.2 per cent. Some analysts suggest that Bullock will aim to maintain maximum flexibility by refraining from providing specific guidance on the central bank’s future direction.
Commonwealth Bank economists anticipate that investors will closely scrutinize Bullock’s remarks. While a November rate cut remains a possibility, it is not guaranteed and depends on forthcoming data. Westpac economists highlight the conflicting indicators facing policymakers, noting a gradual softening in the labour market alongside hotter-than-expected CPI components in August.
On the equities front, futures suggest the S&P/ASX 200 Index is poised to open higher. Globally, attention will be focused on the US non-farm payrolls report, providing insights into the Federal Reserve’s upcoming decisions. In Australia, key economic data releases this week include the goods trade balance, household spending figures, and the RBA’s financial stability review.
