BBH analysts see extended RBA pause as likely despite firm inflation, citing sub-potential growth and a high cash rate near neutral estimates.
Brown Brothers Harriman analysts expect the Reserve Bank of Australia to maintain its pause in the tightening cycle, pressuring the Australian Dollar despite persistent inflation concerns. June and Q2 CPI data are anticipated to show trimmed mean inflation rising to 3.7% year-over-year, a two-year high, keeping rate hike bets alive.
Headline CPI is forecast at 4.0% for the second consecutive month, while trimmed mean CPI increased from 3.5% in Q1. RBA cash rate futures currently price a 30% chance of a 25bps hike in August, with a full 25bps increase priced by year-end.
The RBA projects real GDP growth below potential for the next two years, and the current cash rate of 4.35% is near the top of neutral rate estimates. Upcoming speeches by RBA Governor Michele Bullock and Assistant Governor Sarah Hunter may offer further policy guidance ahead of the August 11 decision.