Australian Dollar: RBA uneasy pause – Standard Chartered
Standard Chartered’s Nicholas Chia expects the Reserve Bank of Australia (RBA) to keep the cash rate at 4.35% at its 11 August meeting, with no further hikes this year. Q2 core inflation and short-term expectations have eased, while the labour market has softened.
Standard Chartered’s Nicholas Chia anticipates the Reserve Bank of Australia (RBA) will maintain the cash rate at 4.35% during their August 11 meeting, with no additional rate increases for the year. Core Q2 inflation and short-term expectations have cooled, while the labor market has weakened. However, the bank cautions that another hike in Q4 is possible if demand does not decelerate enough.
They continue to anticipate the RBA will keep the cash rate at 4.35% at their August 11 meeting, citing the economy's elevated starting point due to excess demand and a positive output gap as reasons for cautiousness. Economic momentum seems to be decelerating, as indicated by a softening labor market and rising unemployment in June, although job vacancies and robust employment growth still suggest some labor market tightness.
Housing prices fell significantly in July, possibly due to the impact of cash rate hikes and uncertainty over budgetary tax changes. Our base case remains that the RBA will not hike rates again in the foreseeable future, with the primary risk being another rate hike in Q4 if the central bank remains unconvinced that demand is slowing enough to curb price pressures.
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