If you’re looking for market fireworks from today’s RBA interest rate decision, be prepared for disappointment.
Everyone — from analysts, economists or interest rate traders — thinks that the cash rate will remain on hold at 1.50%.
And there’s not much expected to come from the accompanying monetary policy statement, with few major changes expected to what was previously communicated in May.
The lack of excitement over today’s meeting is captured beautifully in the flow chart below from TD Securities.
According to Prashant Newnaha, rates strategist at TD, not only is the RBA 99.9% certain to keep the cash rate steady at 1.50%, there’s a 95% probability that the bank will deliver a neutral policy statement, largely mirroring what was communicated in the previous statement.
As such, TD expects that the market reaction across the Australian dollar and rates markets will be negligible.
Hardly exciting, right?
While there’s absolutely nothing wrong with this assessment — it’s reflective of the boarder view across financial markets — the lack of expectation means that a surprise in the statement could lead to a short-term bout of market volatility.
It’s probably not going to happen, but there’s clearly a risk that it may.
That all but ensures there will still be plenty of attention on the statement when it is released at 2.30pm AEST.