RBA EXPECTED TO LEAVE KEY INTEREST RATE ON HOLD AS INFLATION LINGERS

• Interest rate in Australia will likely stay unchanged at 4.35%.
• Reserve Bank of Australia Governor Michele Bullock to keep her options open. 
• Australian Dollar bullish case to be supported by a hawkish RBA.

The Reserve Bank of Australia (RBA) will announce its decision on monetary policy early on Tuesday. Australian policymakers are widely anticipated to keep the Official Cash Rate (OCR) unchanged at 4.35%. In the March meeting, the RBA moved away from the tightening bias, scrapping references to potential rate hikes from the Board’s statement. As a result, the Australian Dollar (AUD) plummeted.

But much water has passed under the bridge since then. On the one hand, the Monthly Consumer Price Index (CPI) rose 3.5% YoY in March, while on the other hand, the latest wage growth figure indicated persistent upward pressures. Wages increased 4.2% YoY in the last quarter of 2023