As expected, the Reserve Bank of Australia (RBA) decided to leave its cash rate target unchanged at 4.35% in Aug, for a sixth straight meeting. It also kept the interest rate paid on Exchange Settlement balances unchanged at 4.25%, UOB Group economist Lee Sue Ann notes.

RBA set to stay on a ‘higher for longer’ gear

“The Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35% today (6 Aug), as expected, and continued to emphasize ‘the need to remain vigilant to upside risks to inflation’.

“It expects underlying inflation to be higher than previously estimated, seen easing to 3.5% by the end of this year, and then hitting 3.1% in mid-2025. It is forecast to reach the RBA’s 2-3% target band at the end of 2025.”

“A combination of sluggish growth and slow progress on inflation will likely mean the RBA will have to stay on a ‘higher for longer’ gear. We are penciling the first rate cut in Nov, though this remains highly data dependent and there is increasing risk of a push back in timing.”