Synopsis:

Credit Agricole expects the RBA to keep its cash rate unchanged at 4.35% next week, with recent inflation and retail data showing no need for immediate policy changes. Moderate inflation and steady, but not excessive, household spending support a neutral outlook, with potential rate cuts delayed until February 2025.

Key Points:

• Australian trimmed mean inflation at 3.5% YoY aligns with RBA’s forecast, down from 4.0% YoY, easing pressure for policy adjustments.
• Retail sales growth remains moderate, with a 0.1% MoM rise in September and 0.5% QoQ in Q3, indicating that households are saving much of their disposable income boost from tax cuts and rebates.
• Despite stable household consumption, construction and government investment are boosting economic activity.
• The RBA is expected to retain a neutral outlook, keeping options open for future decisions while maintaining the cash rate at 4.35%.
• Rate cuts are forecast to begin in February 2025, leaving the RBA behind other G10 central banks, which supports the AUD.

Conclusion:

Credit Agricole sees the RBA’s upcoming decision as a hold, with recent data reinforcing a steady policy stance. The RBA is unlikely to alter its outlook with inflation contained and household spending stable, supporting a neutral approach that indirectly bolsters the AUD.