The Reserve Bank of Australia (RBA) is expected to leave its cash rate unchanged at 4.35% due to the combination of a higher-than-expected unemployment rate and an inflation reading that undershot forecasts, ANZ said in a Wednesday report.
ANZ expects the central bank's rate hold decision to be unanimous on Aug. 11, although policymakers will likely deliberate both a hike and a hold.
And while the RBA is highly likely to remain hawkish on inflation and retain the option for more rate hikes, ANZ doesn't foresee any further increases in borrowing costs. It expects the central bank to launch a mild easing cycle over the second half of 2027 with two rate cuts of 25 basis points each.
Additionally, the RBA is expected to note that inflation remains too high and will likely stay outside the target range for some time. The central bank is also likely to discuss Australia's construction sector and risks around capacity and price pressures, ANZ said.
"We expect little change to the near-term GDP growth forecasts, while those for 2027 and 2028 should be revised up, given a lower assumed cash rate path," ANZ said. It also sees the central bank forecasting the unemployment rate to drift higher over 2027 and 2028.
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