ING preview the Reserve Bank of Australia decision due at 2.30pm Sydney time:
- 0430 GMT
- 0030 US Eastern time
Of 32 economists surveyed by Bloomberg, 13 expect a rise of 25bp to 4.35%, while 19 (including ourselves) expect no change to the current 4.1% cash rate target.
The main reasons for our decision are as follows:
- The RBA hiked in June, and although the data has been mixed, back-to-back hikes seem excessive with rates already at an elevated level.
- Moreover, the run of recent inflation data has been far more benign than was expected, and if last month’s finely balanced decision was pushed over the edge by higher-than-expected inflation, this month’s decision should result in no change by the same logic.
- Finally, there will be much better occasions for the RBA to hike in the months ahead if that remains necessary. September will be one of those, as the RBA can assess the impact of large electricity tariff increases which are due in July, and should be visible in CPI data by September. Also, favourable base effects drop out after July's CPI release for several months, so it is not inconceivable that we see some backing up of inflation over the third quarter before it dips again into the year-end.
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Earlier previews:
- ANZ still expect a rate rise from the RBA next week, a +25bp cash rate hike
- After Australia's better CPI data yesterday NAB still expect a July RBA rate hike
- Westpac reaffirms its forecst for a 25bp Reserve Bank of Australia rate hike on July 4
