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RBA Preview: what to expect from this month’s RBA meeting

The RBA will meet on Tuesday, August the 4th at 2.30PM.

Source: Bloomberg

The economic data that matters:


Unemployment Rate

Wages Growth (YoY)


Retail Sales (YoY)






What are the key themes to watch out of this RBA meeting?

Covid-19 outbreaks, new lockdowns and the economic recovery

Risks to the Australian economic recovery have grown in the month since the RBA last met, as several states confront fresh outbreaks of the Covid-19 virus.

New lockdowns in Victoria, as that state tackles a full-blown second wave, and the risk of further lockdowns in New South Wales and Queensland, as those states seek to contain a lift in new cases of the virus, has forced the market to consider that the Australian economy’s recovery maybe slower and weaker than previously thought.

The markets will be seeking the RBA’s assessment of the situation at this meeting, and whether it may impact the bank’s outlook for the Australia economy, especially ahead of the release of the RBA’s Statement of Monetary Policy on Friday.

Policy settings and potential changes to the RBA’s policy outlook

It’s considered highly unlikely that the RBA will modify its policy make-up at this meeting. The cash rate is expected to stay on hold at 0.25%, the yield curve control program is tipped to stay as is, and the bank’s Term Funding Facility will remain in place.

The RBA has proven reticent in committing to greater policy support in the near-term, stating that it will “do what it can” to support the economy. Given some of the concerns regarding the economic outlook as Australia experiences its Covid-19 second wave, markets will be searching for any indication from the RBA out of this meeting that it sees risks that might justify further policy support, in the short to medium term.

How could the RBA meeting impact financial markets?

The markets have been largely unperturbed by recent RBA-related events lately. The central bank has stuck to a conservative line in discussing policy in recent months, with a lack of volatility stemming from RBA meetings a frequent outcome.

Given the RBA is unlikely to making any statement that might undermine sentiment and confidence in policy, there might be the slight risk the RBA strikes a more dovish tone, with the market’s needing to price in the potential for greater monetary accommodation, as a result. Such an event, though unlikely, would see long-term rates drop, a lift in stocks, as well as a pullback in the Australian Dollar.


The Australian Dollar has been on a tear in recent months, as the currency continues to find itself dragged-higher by the general recovery in risk-assets across the globe, as well as the major depreciation in the US Dollar.

A degree of interest at this RBA meeting will be whether the central bank references the currency’s strength and its potential consequences on the Australian economy. In the unlikely event the RBA attempts to “jawbone” the A-Dollar, it may prove an exercise in futility.

The AUD/USD remains in a solid uptrend, and will likely remain so until a major turn in global risk assets, and the US Dollar.

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