PREVIOUS TRADING DAY EVENTS 01 August 2023

The Reserve Bank of Australia RBA decided to leave the cash rate target unchanged at 4.10 for a second straight month, saying past increases were working to cool demand, stating that it will proceed with more tightening if necessary.

RBA forecast about headline inflation would return to within its 23 target range by late 2025, from the current 6.

Governor Philip Lowe  Higher interest rates were working to cool demand. The pause this month would again provide time to assess the impact of a 400 basis point jump in rates.

The recent data are consistent with inflation returning to the 23 target range over the forecast horizon and with output and employment continuing to grow, said Lowe, adding that further tightening will be dependent on data and the evolving risk assessment. In a relief for policymakers, headline inflation slowed more than expected in the second quarter while retail sales posted their biggest fall this year in June.

While the RBA retains a tightening bias, we expect the hurdle to another rate hike to be high. It would take an upside surprise to the economic data from here for the RBA to shift its assessment of the outlook, said Belinda Allen, a senior economist at CBA.

Both National Australia Bank and Goldman Sachs now see a hike in November, bringing the cash rate to 4.35, compared with expectations for two hikes before.

If the labour markets turn out more resilient than expected, the chance for the RBA…