Westpac Predicts RBA to Hold Cash Rate at 4.35% in August

Westpac's economists are predicting that the Reserve Bank of Australia (RBA) will leave the cash rate unchanged at 4.35% at its August meeting, citing a softer than expected second quarter inflation print.

The Q2 CPI came in below Westpac's forecasts on both headline and trimmed mean measures, with only the downside risks flagged by the bank materialising.

Westpac notes that the substantial pass-through of higher energy costs seen in the early phase of the Middle East conflict has not been followed up by further pass-through in recent months.

The bank expects the RBA to retain a hawkish posture as it works through the coming months of data, arguing that if inflation continues behaving as expected, policymakers can gain confidence that price growth is returning to target under existing settings without needing to move rates further.