MNI RBA Preview - August 2023: Tight Call, Pause After Q2 Close To Forecasts

EXECUTIVE SUMMARY:

• The RBA meets on August 1 and is expected to discuss leaving rates at 4.1% or increase them by 25bp. We expect at the margin that the RBA will keep rates at 4.1% with the tightening bias retained but it is another very close call. We think that the new information in the last month is unlikely to change the central bank’s forecasts or view materially, and as such the July pause should be extended.
• The meeting statement is likely to acknowledge the better-than-expected moderation in inflation but continue to point out that it is “too high” and as such further tightening remains an option. There will also be references to the updated forecasts, which will be published in detail on Friday. Currently a post-meeting speech is not scheduled.
• The August decision is likely to be “finely balanced” and if the Board pauses again, it is unlikely to mean that the tightening cycle is finished. With numerous price and wage increases taking effect on July 1 plus the increase in oil prices already driving fuel prices higher, further rate increases are possible but 400bp since May 2022 gives the RBA Board time to wait and see if demand is strong enough for these developments to be passed onto consumers.

Click to view full preview:

RBA Preview - August 2023.pdf