RBA hold at 4.35% is TD Securities’ base case for Tuesday’s policy decision, with the bank saying the rate call itself should bring little surprise.
TD Securities said its view matches broad market consensus. It also said OIS pricing shows almost no chance of a hike at this meeting. As a result, the bank expects limited immediate impact on the Australian dollar or rates markets from the decision alone.
The firm said the Reserve Bank of Australia remains in a pause-and-observe phase. It pointed to policy that is already restrictive, slower activity after earlier rate increases, and housing sensitivity to past tightening. Additionally, TD Securities said the full effect of earlier hikes has not yet passed through the economy.
RBA Hold at 4.35% in Focus
TD Securities said a softer-than-expected second-quarter trimmed mean CPI print has given the RBA more room to leave rates unchanged this month. However, the bank said the main signal for markets may come from the August Statement on Monetary Policy rather than the rate decision.
That statement will include updated economic forecasts. TD Securities said it does not expect the RBA to make a sharp cut to its inflation forecasts, even after the softer CPI reading. Instead, the bank said elevated oil prices still pose an upside risk to the inflation outlook.
Forecast Language May Drive Reaction
Because of that risk, TD Securities expects the RBA to avoid a strongly dovish tone in its forecast update. Therefore, the bank sees more room for market moves from the wording around forecasts than from a widely expected hold.
Taken together, the preview points to a low-drama outcome on the headline decision. However, TD Securities said any surprise would more likely come from cautious forecast language than from the RBA hold at 4.35% itself.
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Source: InvestingLive
