What can ASX 200 investors expect from the RBA interest rate call tomorrow?

The ASX 200 could make big moves higher or lower tomorrow depending on the RBA's interest rate decision.

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With the next RBA interest rate call due, it's shaping up to be a big day for the S&P/ASX 200 Index (ASX: XJO) on Tuesday.

Tomorrow, at 2:30pm AEDT, investors will learn whether the Reserve Bank of Australia (RBA) lowers, lifts or keeps the official cash rate on hold.

In its ongoing battle to get the inflation genie securely back in its bottle, the RBA has hiked interest rates 13 times since it began the current tightening cycle back in May 2022. As you may recall, at that time Australia's official cash rate stood at a historic low of 0.10%.

While that battle has been effective at getting inflation down from the near 8% levels witnessed at the end of 2022, prices are still rising faster than the RBA's 2% to 3% target range.

With terms like "sticky" and "stubborn" inflation now dominating headlines, could ASX 200 investors see the RBA hike interest rates tomorrow?

Though anything is possible, it's hard to find any analysts forecasting an interest rate cut.

Most likely, ASX 200 investors will see the central bank hold rates steady, with an increase in hawkish language.

Here's what the experts are saying.

Will the RBA lift interest rates or stay on hold?

Commenting on the next likely interest rate move from the RBA, Josh Gilbert, market analyst at eToro said:

Australia's inflation rate slowing less than expected in the March quarter has ignited speculation that the RBA's first potential rate cut may be pushed back to mid-2025, with markets even pricing in the potential for another hike. That does seem far-fetched, but not entirely out of the question.

Gilbert expects ASX 200 investors will see the RBA hold interest rates steady. As for any easing he said, "Rates are likely to stay higher-for-longer given the recent data."

Carl Ang, fixed income research analyst at MFS Investment Management also expects the central bank to hold, while investors can expect a more hawkish tone from RBA governor Michele Bullock.

According to Ang:

For the time being 'hawkish patience' seems the most likely message to come from the RBA in the face of gradual and bumpy disinflation, modest labour market cooling and ahead of key domestic developments starting mid-month.

As for when the ASX 200 could get some tailwinds from rate cuts, Ang added, "Our view still leans towards future rate cuts with Q1 2025 providing the earliest opportunity."

Marcel Thieliant, head of Asia-Pacific at Capital Economics, thinks investors should brace for more than just hawkish words. Thieliant is among a small minority of economists who believe the RBA will boost rates tomorrow.

According to Thieliant (quoted by The Australian Financial Review):

Inflation is proving stickier and stronger than the RBA expected and is on track to overshoot their target for four years, which is quite long. The labour market and wages in the services sector risks keeping price pressures higher for longer.

The market is pricing in about a 4% chance that the ASX 200 could get hit by an RBA interest rate hike tomorrow.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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