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TD Securities strategists expect the Reserve Bank of Australia (RBA) to leave the cash rate unchanged at 4.35%, noting that policy is already restrictive and that Australian activity, particularly housing, is slowing in response to earlier hikes. They highlight that lower-than-expected Q2 trimmed mean Consumer Price Index (CPI) allows the RBA to pause in August, while also expecting only limited changes to inflation forecasts despite elevated Oil prices.
RBA seen holding policy steady
“The RBA is in pause and observe mode as 1) policy is viewed to be restrictive, 2) activity (especially housing) is slowing in response to earlier hikes, and 3) the full impact of earlier hikes is yet to be felt.”
“Lower-than-expected Q2 trimmed mean CPI gives the RBA space to pause at the August meeting, with OIS markets pricing close to 0% odds of a hike.”
“We also get new economic forecasts in the August Statement of Monetary Policy, but we doubt the RBA would downgrade its inflation forecasts sharply amid heightened inflation risks from elevated oil prices.”
“We expect the RBA to keep the cash rate at 4.35% (consensus: 4.35%).”
