RBA Preview - October 2020: No Change Makes Sense

MNI POV (Point Of View): No Change Makes Sense

• The recent speech by the Reserve Bank of Australia (RBA) Deputy Governor Debelle has drummed up a notable amount of interest in the Bank's October decision. The key passage of the address was: "Given the outlook for inflation and employment is not consistent with the Bank's objectives over the period ahead, the Board continues to assess other policy options. The Governor talked about these options at the Anika Foundation event in July."
• We are not convinced that the RBA will pull the trigger this time out. The decision comes on the same day as the heavily awaited Federal Budget, while a "Team Australia" event cannot be ruled out we would suggest that the Bank will wait until at least November to deliver such a move, in order to give itself, the public and market participants enough time to digest the federal and state level fiscal offerings. That would also give the RBA plenty of messaging space to outline its thought process, namely via the minutes of the October meeting and an address from Governor Lowe on October 15. The Bank's November decision will also be accompanied by its quarterly economic forecast update (the SoMP), which gives it further ability to flesh out its beliefs.
• If the Bank does leave its settings unchanged this month then the inclusion or omission of language surrounding the chance of any further easing, along with the details if it is the former, will be the initial market driver in the wake of the decision.

RBA Preview - October 2020.pdf