Reserve Bank of Australia Outlook

The Reserve Bank of Australia (RBA) is anticipated to maintain interest rates at 4.35% in December amidst signs of a slowing economy.

Economic Growth

Recent third-quarter GDP data revealed a significant slowdown in Australian economic growth, leading analysts to believe that the bank will soften its previously hawkish tone. Although inflation control remains a priority, it is expected that this cooling growth will prompt a review of their interest rate policies.

Rate Easing Predictions

Market expectations suggest that the RBA may begin cutting rates in the second quarter of 2025, with some analysts at ANZ and Westpac pushing forward their predictions for the first rate cut to May 2025. They assert that concerns about persistent inflation continue to shape the RBA's outlook.

During its last meeting, the RBA emphasized the need to control inflation while not ruling out any policies for the future.

Impact on the ASX 200

The ASX 200 has recently risen to new highs, driven by hopes of stimulus measures in the U.S. and China. A less hawkish stance from the RBA may enhance stock prices, but caution regarding economic growth could moderate gains.

Currency Reaction: AUD/USD

The Australian dollar has faced pressure due to fears surrounding economic performance, reaching lows seen over a year ago. The potential for RBA rate cuts could lead to further weakness in the AUD, barring any reassurances from the bank in its upcoming meetings that downplay rate cut expectations.