RBA Leaves Cash Rate Unchanged, NAB Sees Shift in Language as Signal

The Reserve Bank of Australia (RBA) left its cash rate unchanged at 4.35% in August, but National Australia Bank's analysts see a subtle shift in language as a significant signal.

NAB chief economist Sally Auld and head of Australian economics Gareth Spence point out that the RBA's Statement on Monetary Policy made only modest tweaks to its forecast set, with no change to the expectation that core inflation returns to target by the second half of 2027.

The analysts note two key shifts in language: financial conditions are now described as 'somewhat restrictive', and the output gap is a little smaller than it was in May. They interpret this as signs the economy is adjusting as required, with growth settling into a steady quarterly run rate of around 0.3 to 0.4% through to mid-2027.

NAB's own forecast remains unchanged: they expect the RBA to hold the cash rate steady through the remainder of 2026, with the first cut expected around the middle of 2027. Auld and Spence caution that risks to inflation remain skewed to the upside, meaning the RBA will stay watchful.