RBA to Maintain Interest Rate as Markets Anticipate Bullock’s Speech for Policy Insights

• The Reserve Bank of Australia is anticipated to maintain stable rates in March.
• Comments from RBA Governor Michele Bullock may influence market dynamics.
• The Australian Dollar exhibits weakness prior to the policy announcement due to prevailing risk aversion.

The Reserve Bank of Australia (RBA) is set to hold its monetary policy meeting with the decision expected early Tuesday. The consensus is that the Official Cash Rate (OCR) will remain unchanged at 4.10%, following a rate cut in February.

During the previous meeting, the RBA implemented a 25 basis point reduction, marking the first adjustment since late 2020. The upcoming decision is scheduled for announcement at 03:30 GMT, followed by a press conference from Governor Michele Bullock at 04:30 GMT.

RBA Expected to Maintain Rates, Focus on Governor Bullock’s Future Rate Insights

The RBA had sustained the OCR at elevated levels longer than other central banks, but subdued economic growth influenced a policy shift in February.

“The Board’s assessment is that monetary policy has been restrictive and will continue to be so even with the recent rate decrease. While some inflation risks have moderated, signs suggest that disinflation could be settling in sooner than previously expected. However, risks remain balanced,” noted the February statement.

Moreover, the statement hinted at a cautious approach towards further interest rate reductions, suggesting no changes are expected for March. This stance is likely influenced by the upcoming Q1 Gross Domestic Product (GDP) data, not due until late April, which the policymakers will consider alongside additional inflation metrics before any future rate adjustments.

The Australian economy expanded by 1.3% in Q4 2024, slightly above expectations, with exports driving modest growth, as reported by the Australian Bureau of Statistics (ABS).

Meanwhile, headline inflation fell to a three-year low of 2.4% in the quarter ending December, as per the Consumer Price Index (CPI), while core inflation also decreased to a three-year low of 3.2%. These figures supported the RBA’s decision to lower rates. The next inflation report is expected in about a month, providing further data for the RBA’s May decision.

With the OCR likely to remain unchanged, attention will turn to Governor Michele Bullock’s commentary for any indications of future monetary policy directions. The tone of the Board’s discussion on rate adjustments will also provide insights into their level of concern over economic conditions. A more dovish outlook could increase the likelihood of rate cuts in the near term.

Impact of the Reserve Bank of Australia’s Decision on AUD/USD

Prior to the announcement, the Australian Dollar (AUD) faces significant selling pressure, with the AUD/USD pair nearing the 0.6200 level, marking its lowest point since March 4. This decline is largely attributed to global market concerns rather than domestic factors, particularly due to impending US tariffs announced by President Donald Trump.

Valeria Bednarik, Chief Analyst at FXStreet, comments, “The AUD/USD pair is bearish ahead of the RBA’s announcement. The expected decision to hold rates, along with awaiting further data, suggests that the meeting might not significantly impact the currency. Concerns over tariffs are likely to continue dominating market sentiment.”

“An unexpected rate change could lead to significant volatility for the AUD/USD pair,” Bednarik further elaborates, although she notes that such a scenario is unlikely.

Bednarik concludes, “From a technical perspective, risks appear tilted to the downside. The AUD/USD pair is trading below all moving averages on the daily chart, with strong downward momentum. Below the 0.6200 level, key supports are found at the March low of 0.6186 and the 0.6130 area. Resistance levels are positioned around 0.6300 and the recent highs at 0.6330.”