Major banks expect the Reserve Bank of Australia to pause rate hikes after softer-than-forecast Q2 inflation data eased pass-through risks.
The Reserve Bank of Australia is widely expected to keep its cash rate unchanged at 4.35% at its August meeting, as softer Q2 inflation data reduces pressure for further tightening. Westpac and CBA both forecast a hold, citing contained energy cost pass-through and downside risks materializing in recent months.
June’s inflation print fell below expectations on both headline and trimmed mean measures, reinforcing the shift in consensus. While the RBA is likely to maintain a hawkish tone, markets anticipate limited AUD volatility unless the board’s language turns notably dovish.
A renewed spike in Middle East-driven fuel costs remains the key upside risk, as it could revive inflationary pressures and complicate the case for prolonged rate stability.