RBA reality check
The central bank is widely expected to keep rates unchanged on Tuesday, but there's much less agreement on whether the next move will be a hike or a cut.
No one thinks the Reserve Bank will move on interest rates tomorrow but that’s not to say they won’t talk about it. And while most market watchers are still fine tuning when they think the central bank will cut rates, the chatter about a potential hike is far from over.
That may well come as a surprise. Because last week, data found that the labour market is slowing in line with what the RBA has broadly been expecting. There's also renewed optimism in the US following softer inflation data, and central banks in Canada and Europe have already started easing.
Rate cut hopes are clearly in the air … again.
Yet one shift since the RBA board last met is that there has been a raft of new government spending announced. Governor Michele Bullock has been clear that all of these changes will be looked at as part of new forecasts due to be published in August. Workers are also weeks away from seeing extra money flow into their pay packets from stage three tax cuts.
Even economists diametrically opposed to one another don’t think much is going to happen to rates right now, especially before all these factors play out. Which makes what the board discusses, and what this hints about its future intentions, the main game.
