- The Reserve Bank of Australia plans to maintain interest rates at 3.60% this September.
- The details of RBA Governor Michele Bullock’s press conference and monetary policy statement will be closely examined.
- The announcement of RBA policy may impact the Australian dollar.
The Reserve Bank of Australia (RBA) is likely to keep its official cash rate (OCR) steady at 3.6% following its monetary policy meeting on Tuesday. This decision is set to be revealed at 4:30 GMT.
The monetary policy statement won’t include quarterly economic projections and will come after a press conference with RBA Governor Michelle Bullock at 05:30 GMT.
A pause on rate cuts is generally anticipated, which may influence the Australian dollar (AUD) based on the comments made by Governor Bullock during her press conference.
RBA waits for quarterly CPI before next rate decisions
A week ago, during testimony to the House of Representatives Standing Committee on Economics, RBA Governor Bullock expressed confidence that inflation would stay within the bank’s target range of 2% to 3%.
“The labor market has softened somewhat, with a slight increase in the unemployment rate, although some pressures still exist,” Bullock stated while addressing the Australian Parliament.
She downplayed the likelihood of rate cuts this week, indicating that “the board will closely assess the evolving risks to inform their decisions.”
Thus, it’s probable that the RBA won’t make any moves until the quarterly Australian Consumer Price Index (CPI) data is released on October 29th.
The Australian Bureau of Statistics (ABS) reported on September 24 that the monthly CPI increased by 3.0% in August compared to a 2.8% rise in July, largely due to basic effects. This was slightly above the 2.9% forecast.
In August, consumer prices in Australia rose at their fastest annual pace following a hot July, prompting speculation about interest rate cuts in November to drop from nearly 70% to 50% following this data.
Insights from the report, particularly concerning the Services sector, indicate risks of higher inflation in the third quarter, leading institutions such as Barenjoe, Deutsche Bank, and others to withdraw their calls for November rate cuts.
Impact of the Reserve Bank of Australia’s decision on AUD/USD
AUD/USD appears to be regaining momentum as it moves away from a three-week low of 0.6521 ahead of the RBA policy announcement on Tuesday.
The wording of the monetary policy decision statement and any hints from the RBA governor will be crucial in influencing both interest rates and the direction of the AUD.
If the central bank continues to adopt a cautious tone while remaining “data-dependent,” there could be a rebound in AUD against the diminishing chances of November rate cuts.
Conversely, if Bullock expresses concerns about US tariffs and the economic outlook for labor markets, investors might view the pause as dovish, which could open the possibility for interest rate cuts in November. This scenario could give Australian sellers the upper hand.
Dhwani Mehta, Asia Session Lead Analyst at FXStreet, pointed out key technical levels for AUD/USD trading post-announcement.
“A careful hold may support further AUD/USD recovery, potentially targeting last week’s high of 0.6628. The 14-day relative strength index (RSI) is approaching midline territory, reinforcing the potential upside for the pair.”
On the flip side, “AUD/USD could see renewed selling pressure if Bullock’s message leans dovishly. In that case, the pair may revisit the three-week low of 0.6521, where it aligns with the 100-day simple moving average,” Dhwani added.
