Here's a playbook for this week's RBA interest rate decision

LEON NEAL/AFP/Getty ImagesA dovish shift from the RBA may be seen in March.
  • The RBA March interest rates decision will arrive on Tuesday, March 5.
  • No economist polled by Bloomberg expects the RBA cash rate will be reduced. Financial markets assign only a 2% chance of a 25 basis point rate cut occurring at this meeting.
  • TD Securities expects the RBA will likely maintain a neutral tone in the accompanying monetary policy statement.

The Reserve Bank of Australia’s (RBA) March interest rate decision will be announced on Tuesday, March 5.

While financial markets and a small yet increasing number of market economists expect the bank believe the bank will have to cut Australia’s cash rate within the next 12 months, few see little chance of that occurring this week.

Implied market probability of a 25 basis point rate cut to the cash rate is deemed to be just 2%, according to interbank futures pricing.

All 26 economists polled by Bloomberg also expect the cash rate to remain at 1.5% with Stephen Koukoulas of Market Economics, previously the most dovish forecaster, pushing back his forecast for the first rate cut to occur in April.

Given the vast majority believe the cash rate will remain unchanged at 1.5% this week, it means the tone of the RBA’s March monetary policy statement will likely determine the subsequent reaction in financial markets.

Will the RBA maintain a neutral bias on the outlook for the cash rate, implying there’s unlikely to be a move in either direction in the near-term, or will the bank turn dovish, increasing the risk that rates could be cut in the coming months?

While that answer won’t be known until 2.30pm AEDT on Tuesday, TD Securities expects the bank will maintain a similar view to that conveyed one month ago, ascribing a 90% probability that the tone of the statement will be neutral.

Here’s a quick synopsis of what it expects, along with the probability it attaches for each outcome as well as the likely reaction in Australian financial markets.

TD Securities

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