Economists at ING analyze how the RBA meeting on Tuesday could impact the Australian Dollar (AUD).
The RBA still has reasons to maintain its hawkish bias
The upcoming RBA announcement poses potential downside risks to the Australian Dollar, particularly in light of the unexpected flattening in January’s CPI at 3.4%, which might prompt discussions among policymakers regarding the possibility of rate cuts. However, we remain unconvinced that this scenario will materialize.
Despite this, the RBA still has several reasons to maintain its hawkish bias. These include its policy rate remaining lower compared to other major central banks, recent upward adjustments in global rate expectations, and persistent concerns about a potential resurgence in inflation.
Looking ahead, we are optimistic about the prospects of a sustained rally in the AUD starting from the second quarter. We are confident that the RBA’s stance won’t significantly hinder this trajectory.
