Deutsche Bank Bucks Consensus, Predicts Reserve Bank of Australia Rate Hold

According to Jin10, Deutsche Bank economists were the only ones among 32 economists in a Reuters survey to predict that the Reserve Bank of Australia would leave rates unchanged on Tuesday; the other 31 expected a 25-basis-point hike to 4.85%. Deutsche Bank said current inflation was in line with the RBA’s previous forecasts and that waiting for more clarity after the U.S. midterm elections, particularly on oil prices, was also reasonable. With markets having almost fully priced in a rate hike, the market impact of the two possible decisions is markedly asymmetric: a hold could weaken the Australian dollar and lift short-term government bonds, while a hike would largely confirm market expectations. The Reserve Bank of New Zealand’s unexpected decision to hold rates last week showed that central banks may still go against near-unanimous market bets, which could make traders more cautious ahead of the RBA’s decision.