Preview: RBA to stay in pause and observe mode, TD Securities says ahead of today's decision
The desk anticipates the RBA will maintain its cash rate at 4.35%, aligning with market expectations and suggesting limited volatility in the AUD and rates markets. According to TD Securities, the crucial insights will arise from the RBA's accompanying Statement on Monetary Policy, which may reflect a cautious outlook despite recent inflation data suggesting room for a pause. Market participants should note the potential for a modest shift in forecast language, with oil prices continuing to pose an upside risk to inflation projections. Per the full note source, the subdued probability of a rate hike today is supported by OIS pricing that indicates negligible expectations from traders for any changes in the policy rate.
What the desk is arguing
The desk positions itself firmly behind TD Securities' expectation of an RBA hold at 4.35%, which aligns with the prevalent market consensus. The analysis emphasizes that this meeting will likely produce limited surprises in AUD or interest rate markets, with the forthcoming monetary policy statement serving as the more significant signal for future positioning.
The RBA's decision coincides with a lower-than-expected Q2 trimmed mean CPI reading, giving the Bank room to maintain its policy stance. Additionally, current OIS pricing suggests almost zero probability for a hike today, reinforcing the expectation for continued observation rather than action from the RBA.
Where it sits in our coverage
The current expectations are largely in line with views from other firms in the market. For instance, consensus targets point toward AUDJPY stabilizing near the 1.075 mark, while forecasts from relevant firms indicate variability: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The strategy agreed upon by jpmorgan aligns with the desk's position as it falls within the consensus range. The desk does not anticipate any major deviations from this viewpoint among aligned firms, given the uniformity in sentiment regarding a hold.
How other firms see it
Most analysts, including jpmorgan and cba, are aligned on maintaining a hold at the current cash rate, supporting the sentiment that the RBA will tread carefully. In contrast, bofa expresses a more cautious stance, suggesting that the RBA could be underestimating inflation risks and therefore might be justified in shifting expectations.
Related currency pairs to monitor include AUDCAD and AUDNZD, as shifts in RBA policy sentiments may spill over into these markets. Observers should also keep an eye on evolving inflation indicators that could influence RBA's future decisions and, subsequently, the performance of the Australian dollar.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01RBA expected to hold at 4.35%, signaling a cautious approach.
- 02Inflation forecasts may not see significant downgrades despite softer data.
- 03OIS suggests negligible expectations for a rate hike today.
- 04Market positioning may hinge on the accompanying Statement on Monetary Policy.
Market implications
Traders should watch AUDJPY closely, particularly as it sits around significant levels that could be influenced by the RBA's statement. A cautious tone on inflation could lead to AUD strength, while any dovish leanings might expose it to downside risks.
Risks to this view
An unexpected adjustment in inflation forecasts or a more hawkish tone from the RBA would challenge the current positioning and could lead to a downward adjustment in AUDJPY. Monitoring oil price developments is critical, as a surge could force the RBA's hand on monetary policy sooner than anticipated.
TD Securities' base case of an RBA hold at 4.35% aligns with broad consensus and with OIS pricing that shows close to zero probability of a hike today, meaning the meeting itself carries limited surprise risk for AUD or rates markets. The more relevant signal for positioning is likely to come from the accompanying Statement on Monetary Policy, where TD Securities expects the RBA to resist sharply downgrading its inflation forecasts despite the softer than expected trimmed mean CPI print, citing elevated oil prices as an ongoing upside risk to the inflation outlook. That combination, a confirmed pause alongside a cautious rather than dovish forecast revision, points to a relatively contained market reaction, with any surprise more likely to come from the tone of the forecast language than from the rate decision itself. --- Earlier: RBA preview: Analysts see cash rate on hold at 4.35% Tuesday RBA preview - Westpac says soft Q2 CPI gives RBA room to hold at 4.35% Preview: RBA meet Tuesday.
CBA expects RBA to hold rates through the rest of 2026 MUFG opens long AUDJPY at 111.20, targets 114.50 as yen intervention debate builds TD Securities sees a straightforward RBA hold today, with the real point of interest being whether the Bank downgrades its inflation forecasts despite softer recent data. Summary: TD Securities expects the RBA to keep the cash rate unchanged at 4.35%, matching broader market consensus. The bank says the RBA remains in a "pause and observe mode", citing restrictive policy settings, slowing activity particularly in housing, and the lagged effects of earlier hikes still working through the economy.
A lower than expected Q2 trimmed mean CPI reading has given the RBA room to pause, with OIS markets pricing close to zero probability of a hike today. The RBA will release updated economic forecasts in its August Statement on Monetary Policy alongside today's decision. TD Securities does not expect a sharp downgrade to the RBA's inflation forecasts, pointing to elevated oil prices as a continuing upside risk to the inflation outlook.
TD Securities expects the Reserve Bank of Australia to leave its cash rate unchanged at 4.35% at today's meeting, a call that matches broader market consensus and leaves limited room for surprise in the decision itself. In a note to clients, the bank said the RBA remains in what it describes as a pause and observe phase of the cycle. TD Securities pointed to three factors behind that stance: policy is already viewed as restrictive, activity is slowing in response to earlier rate hikes, with housing showing particular sensitivity, and the full effect of those earlier increases has yet to be fully felt across the economy.
Against that backdrop, the bank said a softer than expected trimmed mean CPI reading for the second quarter has given the RBA additional room to hold steady this month. OIS markets are pricing close to zero probability of a hike at today's meeting, TD Securities noted, underscoring how settled expectations already are heading into the decision. 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.
Here the bank sees more scope for a 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, arguing that elevated oil prices continue to pose a meaningful upside risk to the inflation outlook that should keep the central bank from turning too dovish in its language. Taken together, TD Securities' preview points to a relatively low drama outcome on the headline rate decision, with the more informative signal likely to come from how the RBA frames its forecast revisions rather than from the decision itself.
Any hawkish surprise in that language, driven by the oil price risk TD Securities highlights, would be the more likely source of market movement out of today's meeting. The decision is due Tuesday, 11 August 2026 at 2:30pm Sydney time (04:30 GMT, 12:30am US Eastern), with Governor Michele Bullock's press conference following an hour later at 3:30pm Sydney time (05:30 GMT, 1:30am US Eastern) This article was written by Eamonn Sheridan at investinglive.com.
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