iscover
The second monetary policy meeting for 2024 is expected to be much like the first as major bank economists expect the Reserve Bank of Australia (RBA) to hold the official cash rate steady at 4.35 per cent.
The RBA's monetary policy board meeting is set to commence this afternoon (Monday, 18 March) and continue through to Tuesday (19 March) morning.
The outcome is scheduled to be announced at 2:30 pm on the second day.
Speaking ahead of the meeting, the Commonwealth Bank of Australia's (CBA) head of Australian economics, Gareth Aird, said the major bank expects a hold in “what should be a very straightforward decision”.
Aird stated the case to increase rates further is “weak" considering economic growth is well below trend, inflation continues to decline, and the unemployment rate is “on a firm upward trend”.
“Any further tightening from this juncture simply runs the risk of a ‘hard landing’ – something the RBA has wanted to avoid through their tightening cycle,” he said.
Aird added that the following May board meeting is the “most likely one for the RBA to jettison its hiking bias” with the major bank’s base case looking for a shift to an easing bias during the August meeting followed by the beginning of an easing cycle in September.
Westpac’s economics team said the RBA will be “comforted by recent developments” given its goal to bring demand back into line with supply and “ensure inflation continues to trend toward and then into the target range” of 2–3 per cent.
“We continue to expect the RBA to remain on hold until September at which time they should have enough confidence in the inflation outlook to slowly begin easing policy,” it said.
Furthermore, Westpac chief economist Luci Ellis stated: “If a restrictive stance of policy is maintained for long enough, inflation continues to decline and ultimately exits the target range on the low side. Some normalisation of policy will therefore need to happen at some point.”
ANZ’s economics team said it expects signs of moderation to result in the RBA shifting towards a neutral policy stance by the May meeting.
Meanwhile, the ANZ team expects rates to remain unchanged during the March meeting with the RBA holding on to a “mild tightening bias”.
“While the January labour force survey came in weak, we think the RBA (like us) is expecting payback in the February data. Q4 2023 GDP was in line with the RBA’s forecast of 1.5 per cent y/y, albeit possibly with a little less momentum in Q4 itself,” it said.
“All up though, we don’t think the board will have seen enough to push them off a tightening bias.”
NAB also expects the cash rate to remain at 4.35 per cent, having amended its forecast as inflation began to ease, with the RBA showing signs that it may look to stay on hold for the near term.
Despite this, the major bank stated the pathway to any cash rate cuts at this time is “very difficult to judge”.
[RELATED: GDP growth slightly below RBA’s forecast]
ISCOVER 
