Economists expect the Reserve Bank to soften its forward-looking guidance given a run of softer economic data.
The Reserve Bank’s March policy decision will be greeted with more nerves than usual after bond traders were wrong-footed by last month’s hawkish shift, lifting peak rate expectations above 4 per cent.
RBA governor Philip Lowe is expected to discuss his outlook on rates and the economy at The Australian Financial Review Business Summit on Wednesday.“That [sentence] is why the market has added the best part of another quarter point to its rate track,” NAB head of FX strategy Ray Attrill said. “Unless the RBA strongly anticipates at least two further rate hikes will be needed, some alteration to this sentence will be required – which could get the markets excited about a potential pause sometime soon.”
Markets are pricing in a 96 per cent chance of a 25 basis point increase as the central bank wrestles inflation back to its 2 to 3 per cent target, representing the tenth consecutive rate increase since May.
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