According to TD Securities strategist Prashant Newnaha, the Reserve Bank of Australia (RBA) is likely to keep its cash rate unchanged at 4.35% during its August meeting, citing recent softer S&P Australia Flash Composite PMI data as a key factor supporting this stance [1]. The PMI data for June indicated a drop in new orders and a moderation in price pressures, which together signal a slowdown in domestic demand and easing output price inflation [1].
Newnaha highlights that while prices remain elevated, the month-on-month Flash Output Prices outcome for June reduces the likelihood of an upside surprise to the RBA's Q2 trimmed mean inflation forecast of around 1% quarter-on-quarter [1]. This environment, characterized by slowing orders and moderating inflation pressures, provides the RBA with the opportunity to pause and assess incoming data before considering any policy changes [1].
TD Securities expects the RBA to maintain its current target cash rate of 4.35% at the August meeting, with the latest PMI details reinforcing the case for a steady policy approach in the near term [1].
CONCLUSION
The latest PMI data and easing inflation pressures support expectations that the RBA will keep rates steady at 4.35% in August. Market participants are likely to interpret this as a signal of a cautious and data-dependent central bank stance.