Experts have predicted the Reserve Bank of Australia will leave the cash rate steady at its August meeting but, despite suborn inflation, a cut could still be on the cards.
According to a Finder survey, 81 per cent of experts believe the RBA will hold the cash rate at 4.35 per cent in August, however almost one in five are predicting an increase.
While 26 per cent of economists expect to see the first cash rate cut happen by the time the RBA finishes its December meeting.
Head of Consumer Research at Finder, Graham Cooke, said the general consensus is that the latest inflation figures aren’t high enough to warrant a rate hike.
“While inflation has been a stubborn thorn in the economy, the June quarter CPI data was in line with expectations, although still higher than the RBA would like it to be,” Mr Cooke said.
“Australia’s core inflation rate, which excludes the most volatile products such as food and energy, has slowed enough to almost rule out another rate rise.
“This doesn’t mean we will see a rate cut in August, but there is a chance we’ll get one by Christmas.”
REA Group, Economist, Cameron Kusher believes inflation is on track and the RBA will hold.
“It’s clear that inflation is largely heading in the direction the RBA is forecasting after the latest CPI data was published,” Mr Kusher said.
“There seems no reason for the RBA to lift or reduce interest rates at this stage.”
LJ Hooker Group Head of Research, Economics & Business Intelligence, Mathew Tiller, said the cash rate would remain on hold.
“Signs of softening employment markets and inflation falling significantly from its peak of 7.8 per cent in December 2022, should see the RBA hold rates steady for the remainder of the year,” Mr Tiller said.
AMP Economist, Shane Oliver, said rates are most likely going to remain unchanged in August.
“Inflation rose in the June quarter but it was in line with RBA’s own forecasts heading off the need for another rate hike,” Mr Oliver said.
“At the same time inflation is still too high and the RBA still lacks confidence that it will sustainably head back to target so it’s too early to expect a cut.”
Associate Professor at the University of New South Wales, Evgenia Dechter, said she did not expect the cash rate to change this month.
“There is a slowdown in inflation and economic activity, and unemployment is creeping up, ,” Ms Dechter said.
“Although inflation remains persistently above the target, the RBA is likely to hold the cash rate.”
James Morley, from The University of Sydney, disagreed and said the RBA needed to be more aggressive to bring inflation back into line.
“The RBA will raise the cash rate because it will want to demonstrate its primary focus is on bringing inflation back down to the target range,” he said.
Despite predicting the hike now, Mr Morley said he could also see a quick cut afterwards.
“A further weakening of economic conditions and improvements in inflation measures for Q3 will allow the RBA to consider reversing the rate rise in December and continue cutting in the new year to bring the cash rate back towards a neutral level,” he said.
