Australia: Central Bank holds rates in August
Latest bank decision: At its August meeting, the Central Bank decided to hold the cash rate at 4.35%, following three increases totaling 75 basis points earlier in the year.
Bank takes wait-and-see approach: The Bank’s decision reflected a desire to assess how the economy is evolving after previous tightening. While consumer spending growth is slowing gradually and labor market conditions have eased, inflation remains above the Bank’s 2.0–3.0% target, with oil and related commodity prices still elevated and short-term inflation expectations above earlier-year levels.
Further increases remain possible: The Bank said it would continue to monitor incoming data and could increase the cash rate further if upside risks to inflation materialize. Most of our panelists see the cash rate on hold at 4.35% through to end-2026, though a few panelists see another hike.
Panelist insight: On the outlook, ANZ analysts said:
“Our expectation remains that the cash rate has peaked, although there is some risk of a final rate hike in November. The RBA staff are expecting trimmed mean inflation to average 0.8% q/q over Q3 and Q4, but the trend in monthly trimmed mean suggests there is a risk we see a slightly higher Q3 outcome. Given the end-point trimmed mean inflation forecast of 2.4%, there may be some tolerance on the part of the Board for a small inflation miss in Q3.”