When is the RBA rate decision and how could it affect AUD/USD?

RBA Overview

The Reserve Bank of Australia is set to announce the latest monetary policy decision at 04:30 GMT on Thursday. The central bank is not expected to make any changes to its cash rate or the quantitive easing program. 

Indeed, the effective cash rate is trading below the target rate of 0.25% and near the central bank's interest rate on excess reserves (IOER) of 0.15%, creating an illusion of markets pricing a rate cut. However, the effective rate seems to have declined mainly due to excess liquidity. 

Lee Sue Ann, Economist at UOB Group has ruled out any change in the RBA's monetary policy stance. Ann says:

“The RBA had left its OCR at record-low of 0.25% after cutting twice in March. The minutes also suggest the RBA is in no rush to implement more unconventional measures for now”.

Focus on forecasts

With the central bank likely to keep interest rates unchanged at a record low of 0.25%, the focus will be on forecasts made in the statement which will be elaborated in the quarterly Statement of Monetary Policy, scheduled for release later this week. 

Westpac analysts noted in their weekly rates strategy note:

Specific interest will be on the detail around the RBA’s growth and unemployment forecasts. The Governor has already identified the broad sweep of these in his speech a fortnight ago, namely: a 10% output contraction in 2020 H1; 6% contraction through 2020; 6–7% growth in 2021 and peak unemployment rate of 10% in June.

As the Governor has already informed markets about the potential economic damage caused by the virus outbreak, the negative comments in the policy statement, if any, are unlikely to have a big impact on the Aussie dollar. 

Its worth noting that RBA's QE program launched in the first quarter is focused on yield curve control and looks subtle compared to the massive bond purchases undertaken by the Federal Reserve and other major central banks. 

The Aussie dollar could come under pressure if the policy statement expresses readiness to adopt a more aggressive approach with respect to bond purchases. 

About the RBA rate decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.