RBA Keeps Cash Rate Steady at 4.35%
In line with expectations, the RBA has maintained the Cash Rate at 4.35%, following a 25bp increase in October. The decision comes after a cooling inflation rate of 4.9% YoY for October and a rise in Aussie unemployment to 3.9%. Market participants will closely monitor the next quarterly inflation figure, scheduled for release on January 31st next year, just before the central bank’s meeting on February 6th.
BoJ Policy Rate Prediction
At 3:00 am GMT, the BoJ policy announcement is expected to be released, with the central bank widely anticipated to keep its Policy Rate unchanged at -0.10%. Speculation surrounding a potential shift away from negative interest rates increased recently due to comments made by BoJ Governor Kazuo Ueda, suggesting that handling monetary policy would become more challenging at the year-end and throughout the following year. Consequently, demand for the Japanese yen (JPY) increased, weighing on the USD/JPY currency pair.
However, subsequent reports clarified that Ueda’s comments were not indicative of a potential rate change, prompting a sell-off of the yen, which later rebounded following the Federal Reserve’s dovish stance. Nevertheless, according to a Reuters poll, it is expected that the BoJ will cap negative interest rates by the end of 2024. This poll also revealed that while no changes are predicted for this week’s meeting, 21% of economists believe the BoJ will start dismantling current monetary conditions in January.
CPI Inflation Projections for November
Current predictions indicate that consumer price inflation will drop below 3.0% in the twelve months leading up to November, primarily driven by slowing food and gasoline prices. This is a decline from the 3.1% recorded in October. Notably, if the figure remains below 3.0% as expected, it will be the second time since early 2021 that inflation has fallen below this threshold. The previous instance occurred in June 2023, when inflation reached 2.8%.
The most recent policy statement from December 6th excluded the previous mention of increasing inflationary risks. However, it emphasized the Governing Council’s readiness to act if necessary. The statement also highlighted the council’s focus on core inflation easing, the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior.