RBA expected to keep cash rate steady @ 4.35% in upcoming meeting despite easing inflation

Info via Reuters Polling on the upcoming Reserve Bank of Australia meeting, showing that the RBA is expected to keep cash rate at 4.35% on Tuesday, August 6

• No rate cuts seen until Q1 2025 despite inflation easing
• 32 out of 33 economists predict no change at the August meeting
• Market pricing shows 55% chance of a cut by end-2024
• Inflation forecast: 3.4% in 2024, 2.8% in 2025

The poll shows that the Reserve Bank of Australia is set to maintain its hawkish stance, holding rates at 4.35% through 2024 despite recent inflation data showing some moderation. ICYMI on the most recent CPI data:

• Australian Q2 core inflation +0.8% q/q (expected 1.0%)

The Reuters poll of economists suggests the first rate cut won’t come until Q1 2025, with the cash rate expected to end 2025 at 3.60%.

Recent inflation prints have been mixed, with May’s unexpected jump to 4.0% followed by a dip to 3.8% in June. This volatility, coupled with inflation still above the RBA’s 2-3% target, is likely keeping policymakers cautious.

Market pricing indicates a more dovish outlook than economists, with a 55% probability of a cut priced in by end-2024. However, the RBA is expected to lag behind other major central banks like the Fed in its easing cycle.

The upcoming August 6 meeting is nearly unanimously expected to result in no change, with only one economist out of 33 forecasting otherwise. The RBA’s projected path suggests a “slow burn” approach to normalization, with potential for up to three 25bp cuts by end-2025.

From the RBA website showing cash and inflation rates

This article was written by Eamonn Sheridan at www.forexlive.com.