Easing Q2 core inflation and softer labor data reduce pressure on the RBA to hike rates further this year.
The Reserve Bank of Australia is expected to keep its cash rate unchanged at 4.35% during its 11 August meeting, as Q2 trimmed mean inflation held steady at 0.8% quarter-on-quarter, below the RBA’s prior forecast of 0.9%. Lower oil prices and easing short-term inflation expectations further support the case for a pause.
Recent data shows a softening labor market, with rising unemployment in June, though job vacancies and employment growth remain robust. Governor Bullock has cited excess demand and a positive output gap as reasons for caution, but economic momentum appears to be slowing.
While the RBA is seen maintaining its hold stance, risks of a Q4 rate hike persist if demand does not cool sufficiently. Housing prices also declined in July, reflecting the lagged impact of prior rate increases.