MNI RBA Preview - February 2024: Prolonged Hold From Cautious RBA

EXECUTIVE SUMMARY:

• The RBA is unanimously expected (Bloomberg consensus) to leave rates unchanged at 4.35% at its February 6 meeting given lower-than-projected Q4 CPI and activity data have been soft since the last meeting. But it is likely to be too soon to remove the tightening bias given still elevated domestic price pressures and tight labour market. The meeting statement is likely to acknowledge the softer data but sound cautious pointing out that the inflation fight has not yet been won and that significant uncertainties persist.
• Talk of rate cuts is probably too soon and the Board may want more time to assess activity and price developments. Thus, a prolonged hold is certainly possible. Given heightened data dependency, the first rate cut is likely to coincide with a meeting that includes new quarterly CPI data and updated forecasts, thus making August more likely than June.
• This will be the first meeting that includes recommendations from the RBA review and there will be significantly more communication. Updated forecasts will be included and should give an indication if the Board is feeling confident that target will be achieved in a “reasonable timeframe”, which is likely to be a requirement to return to neutral.

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RBA Preview - February 2024.pdf