RBA on Hold as TD Securities Sees Pause in Cash Rate Hikes

The Reserve Bank of Australia (RBA) is likely to maintain its policy pause at its August meeting, according to TD Securities strategists. They point out that the cash rate has already been increased to 4.35% and that policy is considered restrictive. This, combined with slowing Australian activity, particularly in housing, which is responding to earlier hikes, suggests a pause is warranted.

The Q2 trimmed mean Consumer Price Index (CPI) came in lower than expected, giving the RBA room to pause its rate hike cycle at the August meeting. OIS markets are pricing close to 0% odds of a hike at this meeting. TD Securities expects the RBA to keep the cash rate unchanged, aligning with the consensus forecast.

While new economic forecasts will be released in the August Statement of Monetary Policy, TD Securities doubts the RBA would sharply downgrade its inflation forecasts despite elevated oil prices posing risks to inflation.