🏦🇦🇺Cable FX Macro Weekly Note: RBA August Cash Rate Decision

**As seen in Risk In The Week report 07/28/23, subscribe at cablefxm.co.uk/reports

The RBA held its Cash Rate unchanged at 4.1% as seen by 19 of 32 economists surveyed by Bloomberg. The statement repeated the central bank’s commitment to bring prices back to target in a reasonable timeframe, while it added that further monetary policy tightening may be required. Higher rates were said to help balance supply-demand dynamics in the Australian economy, however, a continuation of tightening is now seen conditional on how inflation and the economy evolve. The board noted that wage growth has picked up and that the labour market remains tight. Nevertheless, the RBA said that the pause will give the board time to assess the impact of past rate hikes and economic risks. Inflation is still seen as ‘too high’ by the RBA which warned that the path to achieve a soft landing remains a narrow one. GDP Growth projections from the board pencil 2023 output at 1.25% while 2024 is expected to accelerate to 1.75%, inflation is penciled at 4.5% this year before slowing down to 3.25% in 2024. Since forecasts do not capture prices back in target, the RBA is likely to hold a tightening bias, swaps market prices a 50% chance that the RBA lifts the Cash Rate twice by the end of 2023. The desk at NAB says market pricing corresponds to high CPI prints during the following quarters as higher electricity prices and pass-through from minimum wage increases take effect. The desk at UBS sees a 25bps rate hike in Augusts and warned risks are tilted toward an additional increase in November or December. UBS sees a peak Cash Rate of 4.85% We remind you that Deputy Governor Bullock is set to replace current Governor Lowe in September, some other changes will be reflected next year in the format of the central bank’s statements and in the frequency it meets.