The Reserve Bank's new, less frequent meeting schedule hasn't done away with the Melbourne Cup day board meeting — we'll get the latest interest rate decision this coming Tuesday, half an hour before the race that stops the nation at Flemington.
After this week's inflation figures showed price pressures easing off, but the RBA's preferred measure of underlying inflation — the trimmed mean — remaining above its target, no change to rates this month or next is looking like the surest bet.
Commonwealth Bank economists had predicted a rate cut in December but with the trimmed mean coming in higher than they had forecast, they now don't see that happening until February.
Here's what CBA's head of Australian economics Gareth Aird has to say ahead of next week's RBA meeting:
We expect the cash rate will be left on hold and see the chance of any other outcome as trivial…
CBA had forecast a lower outcome for trimmed mean inflation, which had underpinned our view that the RBA could commence normalising the cash rate in December.
We jettisoned that call after the data dropped as the trimmed mean outcome was simply not low enough to see the RBA cut rates this calendar year.
Our base case is now for a first cut in the cash rate in February 2025.
Notwithstanding the change to our call, the inflation data confirmed that the disinflation process has continued.
This will be welcomed by the RBA. Indeed we expect the Board to acknowledge the fall in both headline and core inflation in its Statement on Tuesday…
The upshot is that the latest inflation data will leave the Board more assured that core inflation is on its return sustainably to the target band. And therefore the current policy settings are appropriate. This should mean an on‑hold decision next week is straight forward.
…The Board appears to be fond of the line that it is ‘not ruling anything in or out’ as it does not paint them into a corner. But we are approaching the point at which the Board should feel confident that the next move in rates will be down and not up. Put another way, the RBA’s communication should start to reflect the balance of risks to the monetary policy outlook…
In summary we expect some moderation in language from the RBA next week that implies another rate increase is less likely than previously telegraphed.