By Devayani Sathyan
BENGALURU (Reuters) - Australia's central bank will hold its key interest rate at 4.35% for a third straight meeting on Tuesday and at least until end-September, according to a Reuters poll of economists who see at least two rate cuts in the final quarter of 2024.
While financial markets have priced in rate cuts for most other major central banks starting around June, the Reserve Bank of Australia is a notable outlier with no such mid-year pricing.
Despite the RBA's recent hawkish stance and still-elevated inflation, no economist expected the next move to be up, with a variety of forecasts for a cut in the second half of this year given that economic growth has been lacklustre.
"We are seeing below-trend growth and so we think unless we get a large upside surprise, it's more a matter of how long they have to wait and stay in restrictive territory rather than being pushed higher. We certainly don't think the RBA is going to be in a position to cut rates for some time yet," said Taylor Nugent, senior economist at NAB.
All 40 economists polled by Reuters March 11-14 predicted the RBA would keep its official cash rate unchanged at 4.35% on March 19.
"For the March meeting, we don't expect the RBA to change their communication too much. Data has come broadly in line with what they expect and we think they'll need to see more evidence on the domestic inflation picture before really updating their view," Nugent added.
All major local banks - CBA, Westpac, ANZ and NAB - forecast no change in rates until at least end-August. CBA and Westpac saw the first rate cut in September, while ANZ and NAB forecast it in November, the same as last month's poll.
The timing of rate cuts from the RBA also may be guided by when the U.S. Federal Reserve starts easing, which is widely expected to happen in June. Historically, the RBA has eased well after the Fed and cut at a much slower pace.
Although median poll forecasts since late last year have showed the first RBA cut will come in the final quarter of 2024, views around exactly when are still divided, with no majority for any meeting, but with the strongest minority for November.
Interest rate futures are pricing in a 25-basis-point cut by end-September.
Of the 32 economists polled who specified a meeting for the first cut, 13 said November. Another two said June, eight said August, four said September, and five said February 2025.
The median forecast showed rates at 4.35% through end-September, with two rate cuts to 3.85% by end-2024.
A slight 55% majority, 22 of 40, said rates will fall by at least 50 basis points by end-year. Another 12 said just one 25-basis-point cut and the remaining six said rates would stay on hold at 4.35% for the rest of this year.
"They (RBA) will be well aware of market pricing and I would expect we'll get some hawkish warnings from the RBA trying to tell markets not to get ahead of themselves," said Ben Picton, senior strategist at Rabobank, who expects just one cut this year.
"The economy is still growing, albeit at a subdued pace. The labour market is still quite strong..., and when we have asset prices at very elevated levels, that's sending us the signal financial conditions aren't actually super tight. So, maybe the RBA has to be a little bit careful about cutting too soon."