TD Securities strategists anticipate that the Reserve Bank of Australia (RBA) will keep the cash rate unchanged at 4.35%, citing that current policy is already restrictive and that Australian economic activity, particularly in the housing sector, is slowing as a result of previous rate hikes [1]. The strategists note that the lower-than-expected Q2 trimmed mean Consumer Price Index (CPI) provides the RBA with justification to pause at the upcoming August meeting, with Overnight Index Swap (OIS) markets pricing in nearly 0% odds of a rate hike [1].
TD Securities further highlights that the RBA is in a 'pause and observe' mode, waiting to assess the full impact of earlier rate increases, which has yet to be fully realized in the economy [1]. While new economic forecasts are expected in the August Statement of Monetary Policy, the strategists do not anticipate the RBA will sharply downgrade its inflation forecasts, given ongoing inflation risks from elevated oil prices [1].
The consensus among analysts, as reflected by TD Securities, is that the RBA will maintain the cash rate at 4.35% [1]. No significant market reaction or forward-looking analyst opinions beyond the expectation of a continued pause were discussed in the article.
CONCLUSION
TD Securities expects the RBA to keep its cash rate steady at 4.35%, supported by slowing economic activity and a lower-than-expected Q2 CPI. The central bank is likely to remain cautious, monitoring the delayed effects of previous hikes and ongoing inflation risks.