The Reserve Bank of Australia (RBA) decided to leave the cash rate target unchanged at 4.10%, stating that the latest decision to hold will provide some time to assess the impact of the increase in interest rates to date and the economic outlook

We were anticipating a 25bps hike at this meeting but had acknowledged that it would be a close call. While the slump in the latest headline inflation was positive, two key components – electricity and rents – of the CPI basket could delay the return of inflation to the RBA’s 2-3% target band.

The next batch of quarterly CPI data (2Q23) will be released on 26 Jul. Before that, labour market data for Jun will be rolled out on 20 Jul. We think the RBA will likely push for a 25bps rate hike at the 1 Aug monetary policy meeting. It will also be when the RBA updates growth and inflation forecasts.