RBA Holds Rates as Inflation Cools, Housing Weakens

The Reserve Bank of Australia (RBA) is expected to keep interest rates unchanged on Tuesday, August 10, at 4.35%, according to economists.

Australia's second-quarter Consumer Price Index (CPI) showed a sharper-than-expected moderation in inflation, with headline inflation easing to 3.9% year-on-year and trimmed-mean inflation falling to 3.6%. This was below the RBA's previous forecasts and strengthens the case for an extended period of steady rates.

Westpac expects the housing weakness to remain an 'air pocket' rather than develop into a prolonged downturn, and has removed two previously expected rate hikes while bringing forward its forecast for subsequent rate cuts to August 2027.