The Reserve Bank of Australia monetary policy announcement and statement are due at 0430GMT

Earlier previews:

This now via National Australia Bank:

The RBA Board is certain to keep the cash rate on hold this Tuesday. Not even a single basis point hike is priced in by the market, a reflection of the Bank's clear willingness to wait for a meaningful lift in wages growth and inflation and in no mood to cut either. Consistent with this, Governor Lowe's comments at last week's ECB Central Banking Forum noted three options for central banks faced with low wages growth and inflation:

  • 1) More stimulus - lower interest rates, do more QE etc.
  • 2) Accept inflation will be a bit lower than desired and allow a gradual return to target.
  • 3) Try and lift inflation expectations - in theory this will also lift actual inflation outcomes.

The RBA is strongly aligned to the second option. It's a data dependent, wait-and-see approach, though markets are likely to be alert to any changes on

  • international trade policy and potential spill overs,
  • local housing developments,
  • and the ever-rising price of oil

for any suggestions of a more dovish monetary policy tilt.