RBA Expected to Hold Rates Steady Amid Restrictive Policy

TD Securities strategists expect the Reserve Bank of Australia (RBA) to maintain its cash rate at 4.35%. They argue that policy is already restrictive and Australian activity, particularly housing, is slowing in response to earlier hikes.

The lower-than-expected Q2 trimmed mean Consumer Price Index (CPI) has given the RBA room to pause at the August meeting, with OIS markets pricing close to 0% odds of a hike.

The analysts also doubt that the RBA would downgrade its inflation forecasts sharply amid heightened inflation risks from elevated oil prices. They expect only limited changes to these forecasts in the upcoming Statement of Monetary Policy.