RBA Expected to Hold Rates at 4.35% as TD Securities Flags Inflation Forecasts as Key Signal
Key Takeaways
- •TD Securities expects the RBA to keep its cash rate unchanged at 4.35%, aligning with the broad market consensus and OIS markets pricing near-zero probability of a hike.
- •The RBA has maintained a pause-and-observe stance due to already restrictive policy, slowing economic activity with particular housing sector sensitivity, and unrealized effects of previous rate increases.
- •A softer-than-expected Q2 trimmed mean CPI reading has provided the central bank with additional justification to hold rates steady.
- •TD Securities anticipates limited changes to inflation forecasts despite the soft CPI print, as elevated oil prices continue to present an upside risk to the inflation outlook.
- •The rate decision is scheduled for Tuesday, 11 August 2026 at 2:30pm Sydney time, with Governor Michele Bullock's press conference following at 3:30pm.
TD Securities expects the Reserve Bank of Australia to leave its cash rate unchanged at 4.35% at today's monetary policy meeting, a call that aligns with broad market consensus and leaves limited room for surprise in the headline decision. The rate has held at 4.35% since November 2023, when the RBA delivered its most recent 25-basis-point hike at the end of a tightening cycle that began in May 2022 from a record-low 0.1%.
In a note to clients, TD Securities described the RBA as remaining in a "pause and observe mode," citing three key factors behind that assessment. First, policy is already viewed as restrictive. Second, economic activity is slowing in response to earlier rate hikes, with the housing sector showing particular sensitivity. Third, the full effect of previous rate increases has yet to be felt across the broader economy.
A softer-than-expected trimmed mean CPI reading for the second quarter has given the RBA additional room to hold steady. The trimmed mean is the RBA's preferred gauge of underlying inflation, as it strips out volatile price movements that can distort the headline figure. OIS (overnight index swap) markets are pricing close to zero probability of a hike at today's meeting, TD Securities noted, underscoring how settled expectations are heading into the decision.
Statement on Monetary Policy in Focus
Beyond the rate call itself, TD Securities flagged that today's meeting will also bring updated economic forecasts via the RBA's August Statement on Monetary Policy, released alongside the decision. Here the bank sees greater scope for market reaction than in the widely anticipated hold.
TD Securities said it does not expect the RBA to sharply downgrade its inflation forecasts despite the softer recent CPI print. The bank argued that elevated oil prices continue to pose a meaningful upside risk to the inflation outlook, which should keep the central bank from adopting overly dovish language in its forecast revisions.
Taken together, the preview points to a relatively contained market reaction on the headline rate decision. Any hawkish surprise is more likely to stem from the tone of the forecast language—driven by the oil price risk TD Securities highlights—than from the rate decision itself.
Meeting Schedule
The rate decision is due Tuesday, 11 August 2026 at 2:30pm Sydney time (04:30 GMT, 12:30am US Eastern). RBA Governor Michele Bullock's press conference will follow at 3:30pm Sydney time (05:30 GMT, 1:30am US Eastern).
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