RBA to hold the line in June decision

Major bank economists have predicted the Reserve Bank of Australia (RBA) to leave the official cash rate on hold at 4.35 per cent during its upcoming June monetary policy decision.

The board is expected to retain the same stance on the potential movement of interest rates much like what was heard from RBA governor Michele Bullock following the May monetary policy meeting.

Commenting on the upcoming decision, Westpac senior economist Matthew Hassan said recent data will “provide some comfort” that restrictive policy is bringing inflation back to target; however, he noted the “path is still uncertain”.

“Vigilance remains the order of the day until the RBA becomes more confident of achieving a sustained return to sub-3 per cent inflation,” Hassan said.

“As always, there will be many other considerations for the RBA Board, but June’s meeting is likely to be framed in much the same way as May’s.

“That was in the context an upside surprise to inflation that saw the Board consider an additional rise but opt to leave rates unchanged and adopt a more vigilant approach to assessing further risks.”

Hassan further stated that the RBA will be looking for more evidence around inflation “before it can relax, let alone be confident enough” about bringing inflation under control before shifting its stance.

Commonwealth Bank of Australia (CBA) head of Australian economics Gareth Aird said the recent run of economic data has been “largely in line” with the RBA’s forecasts from the May Statement on Monetary Policy and expects the RBA to hold the cash rate in “what should be a straightforward decision”.

Aird said on the recent labour force datasets released since the previous meeting: “There have been two monthly labour force surveys since the RBA Board met in May. The data is choppy month to month.

“But overall, the track of the unemployment rate is broadly evolving in line with the RBA’s latest forecast. For context, the RBA forecasts the unemployment rate to average 4.0 per cent over Q2 24.

“So far, the unemployment rate has averaged 4.04 per cent over the first two months of the June quarter. Put simply, there is nothing in the recent labour market data that would influence the RBA to change their tune in either direction on the policy outlook at the upcoming board meeting.”

Ahead of the meeting, ANZ announced that it has shifted its cash rate cut call to February 2025 from November 2024, with the RBA remaining on hold for the remainder of the year.

ANZ’s head of Australian economics Adam Boyton said: “It’s not that monetary policy isn’t working. It is.

“The economy has clearly slowed, particularly across private final demand. It’s for this reason (and as we detailed after the Q1 CPI) that we think a rate hike remains unlikely.

“However, getting an appropriate balance between the level of demand and supply is likely to take a little longer than expected".

[RELATED: Major bank shifts rate call]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

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