RBA to hold rates at 4.10% on Tuesday, but will hike again next quarter

The Reserve Bank of Australia will keep its key interest rate unchanged at 4.10% on Tuesday as inflation shows signs of easing, according to a Reuters poll of economists who do however largely expect a final hike next quarter.

While consumer inflation slowed to a 17-month low of 4.9% in July, from 5.4% in June, it was well above the central bank’s target range of 2-3%, keeping expectations for future rate hikes alive.

Unlike the past few Reuters polls where respondents have been mostly divided just days before an RBA decision, the latest poll showed them nearly unanimous for no move, but still with a lack of consensus on the level at which rates would peak.

With the recent decline in inflation and a slight rise in unemployment, all but two of 36 economists said the RBA would hold its official cash rate (AUCBIR=ECI) at 4.10% on Sept. 5, in line with interest rate futures pricing.

Two respondents in the Aug 30-Sept 1 poll expected a 25 basis point (bps) hike.

“In August, the RBA saw a credible path to get inflation back to target with rates of 4.10% and when we look at the data flow since then we don’t see anything that would have pushed them off that assessment,” said Taylor Nugent, economist at NAB.

“There are still risks on the inflation outlook and the data queues through Q3 will show some of that strength in service inflation persisting … and (we) see them feel the need to tighten monetary policy a little bit further.”

This report’s information was first seen on REUTERS; to read more, click this link.