Economists at ING analyze how the RBA meeting on Tuesday could impact the Australian Dollar (AUD).
The RBA announcement does carry some downside risks to the Australian Dollar, as the unexpected flattening in January’s CPI at 3.4% might prompt policymakers to open the discussion on rate cuts. We are not convinced that this will happen, though.
The RBA still has reasons to maintain its hawkish bias, given a lower policy rate compared to other major central banks, the recent hawkish repricing in global rate expectations, and the lingering risks of a rebound in inflation.
We like the chances of a sustained AUD rally from the second quarter and are not too worried that the RBA will get in the way.
