RBA to stand pat amid Delta covid strain woes, no relief for the AUD – ING

Analysts at ING Bank provide a sneak peek at what they expect from the Reserve Bank of Australia’s (RBA) monetary policy meeting due this Tuesday at 0430 GMT.

Key quotes

“We think policymakers in Sydney (a city that is about to spend the whole month of August in lockdown) will not make any amendment to the current policy stance after the adjustments announced in early July. “

“The jump in inflation to 3.8% in 2Q should be dismissed as transitory, and the Bank will likely wait for more indications from the labor market before reacting on the policy side.” 

“The recent spread of the Delta Variant, which is triggering fresh restrictions in Australia, is likely another reason why the RBA should revert from sounding more hawkish or upbeat on the recovery at this meeting. It's key to note that, differently from the US and Europe, only 14% of Australians are fully vaccinated.”

“We think the RBA won't be able to lift AUD .... with the currency that may remain a laggard in the pro-cyclical space and face material downside risks if iron ore prices keep falling.”