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(Bloomberg) — Australia’s central bank is poised to keep interest rates at a 13-year high, marking a year of unchanged policy as it grapples with a slow pace of disinflation and mounting global risks capped by a tight US election. 

Economists see the Reserve Bank holding the cash rate at 4.35% on Tuesday — and leaving it there until at least February — with the board’s statement expected to remain cautiously hawkish. It’s likely to highlight the need for restrictive policy given an accompanying update of economic forecasts is set to show core consumer prices staying stubbornly elevated.

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The inter-meeting period has seen a consolidation of trends: a strong labor market, still-elevated inflation and a deteriorating global backdrop. Geopolitical strains have been at the forefront with North Korean troops joining Russia’s war on Ukraine and Israel and Iran conducting missile strikes on each other. Markets are already pricing a return of Donald Trump as president — an outcome that will likely lead to an intensification of trade turmoil. 

“Globally, there’s more uncertainty than usual and coupled with the domestic data, argues for caution and patience from the RBA,” said Su-Lin Ong, chief economist at Royal Bank of Canada. “Top of the list of uncertainties will be the US election — both the presidency and composition of the Congress.”

Financial markets are bracing for volatility from the US presidential election. Traders are weighing the impact of a disputed result or a renewed trade war with China. Beijing last month unveiled aggressive measures to underwrite growth that has been lackluster in recent times.

Economists say they will be interested in any discussions around the Chinese economy in the RBA’s commentary. China buys almost a third of Australian exports and has an outsized influence on the nation’s economic performance.

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Treasurer Jim Chalmers last month hailed China’s new stimulus effort as a “really welcome development” for both his nation and the world at large. Chalmers pointed to weak demand in China as among factors that have been weighing on his nation’s economy.

Despite Australia’s anemic growth, the RBA isn’t prepared to cut rates yet with Governor Michele Bullock reiterating that inflation needs to move “sustainably” inside its 2-3% target. As a result, traders have pushed back their pricing for an easing to May 2025, from February previously. 

Even when rate reductions do begin, many economists expect the RBA will undertake a shallow easing cycle, reflecting its cash rate peaking 1 percentage point below that of the Federal Reserve. The US central bank will meet a day after the RBA and Bloomberg Economics predicts another 25-basis-point cut.

“The decision could be impacted by October payrolls and the presidential election, which will both come before then,” economists Chris Collins and Anna Wong wrote. “Surprisingly weak payrolls or uncertainty over the election result could trigger market turmoil.” 

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Unlike the Fed, the RBA doesn’t release a dot plot for rates but it will publish updated quarterly economic forecasts alongside its decision. Economists don’t expect major changes to the CPI outlook. The central bank’s August update showed trimmed mean inflation, a core gauge of prices, easing to 2.9% by December 2025 and then to 2.6% by late 2026 from 3.5% last quarter. 

The RBA is focusing on underlying inflation as government rebates are suppressing the headline figure.

“We see no reason for the RBA to change its messaging that it is not ruling anything in, or out,” said Josh Williamson, economist at Citigroup Inc. “Thus, the neutral-hawkish bias should persist.”

If Australia’s labor market remains strong, Williamson said, the RBA will likely delay rate cuts to May.  “Risks are now squarely towards a higher terminal and delayed rate cutting cycle.”

Australia is also due to hold an election by May 2025.

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