The Reserve Bank of Australia (RBA) will announce its monetary policy on Tuesday and is expected to keep the Official Cash Rate (OCR) at a 12-year high of 4.35%.

In 2024, the RBA reduced the number of monetary policy meetings, cutting the Board's sessions from eleven to just eight per year. Officials made this decision to give the Board more time to evaluate economic developments.

Recent data since the December decision showed a significant drop in inflation, while economic growth remains weak. This aligns with market expectations that there will be no changes to the OCR.

With the OCR staying at its record high, attention is focused on Governor Michele Bullock’s statement and press conference. The RBA's December statement noted a continuing decline in inflation, though it remains high. Wage growth has reached 4% faster than expected, but it is unlikely to increase further. Output growth is below trend, and the labor market remains tight but is slowly easing. Board members agreed that financial stability is not a constraint on current monetary policy.

Australian policymakers maintained their stance on additional rate hikes, even as inflation expectations remained above target. However, recent data offered optimism. The Consumer Price Index (CPI) rose by 0.6% in Q4, below the forecasted 0.8%, according to the Australian Bureau of Statistics (ABS). The RBA's favored measure, Trimmed Mean CPI, rose 0.8% in the same period and 4.2% year-on-year, down from 5.1% in Q3. The Monthly Consumer Price Index rose by 3.4% year-on-year in December, down from 4.3% the previous month.

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The analysis "Australia's Central Bank: Investors Drawn to RBA's Shift in Tone" is based on fundamental and technical views from trusted sources and does not constitute advice or solicitation. Always remember that this content is meant to enrich readers' information. Be sure to conduct independent research on other forex-related information as a reference for your trades.

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