ANZ: “The RBA Board left the cash rate unchanged (as was widely expected) and retained a hawkish tone to the post-meeting statement. At the risk of reading too much into the RBA’s words, if anything we’d view it as more hawkish than June and May.

• The accompanying forecasts in the Statement on Monetary Policy (SMP) have a slightly slower return of trimmed mean inflation to the mid-point of the target versus May, but also a marginally higher peak in the unemployment rate (4.4% now versus 4.3% previously).”

• “ANZ Research’s views remain unchanged on account of today’s decision, post-meeting statement and SMP. We expect the first cut will be in February 2025, with the cash rate to end that year at 3.60%, marking the low for the cycle. Given the tone of today’s statement, a rate cut this year would most likely

require a much more rapid deterioration across the activity side than we expect.”

CBA: “The overall message out of the RBA was a little more hawkish than we anticipated today. But given the RBA is highly data dependent it will ultimately be the data that determines the outlook for monetary policy. Our base case is unchanged. We continue to see the RBA delivering a first 25bp interest rate cut in November 2024. This is premised on a Q3 24 timmed mean CPI of 0.8%/qtr (or lower) and an ongoing upward trend in the unemployment rate (a firmer uptrend than the RBA’s forecast profile).”

• “The risk clearly sits with interest rate relief not arriving until H1 25. But we believe the data wqill continue to evolve in a way that sees the RBA cut the cash rate in November.”

Goldman Sachs: “The RBA left the cash rate unchanged at 4.35% at August’s Board meeting, in line with our and consensus expectations (GSe/Bloomberg median: 4.35%). Financial markets were pricing in +0.5bp of tightening

immediately prior to the meeting, down from ~+17bp around a month prior.

• The attending statement reiterated the RBA’s neutral forward guidance, noting the Board “is not ruling anything in or out.” That said, the RBA revised higher its estimate of the gap between aggregate demand and aggregate supply, raised its medium term trimmed mean inflation forecasts by +10bp (June-25: +3.1%yoy, June-26: +2.7%yoy), and cautioned that the Board remained “vigilant to upside risks”.

• The RBA also introduced the language: “Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range”, while sounding more cautious on global growth and financial markets.

• Overall, today’s language and forecast changes were broadly in line with our expectations.”

HSBC: “As we had expected, the recent Q2 inflation figures were just weak enough to mean the RBA did not hike today, but high and sticky enough that the central bank’s primary concern is still that inflation is not falling fast

enough.” “We see the RBA on hold through 2024 and our central case is that it will not cut its cash rate until Q2 2025.”

• “As today’s RBA statement noted, ‘inflation in underlying terms remains too high, and the latest projections show that it will be some time yet before inflation is sustainably in the target range’. The RBA revised up its own forecasts for the trimmed mean slightly, by 0.1ppts by the end of 2025 and by mid-2026 (we had made a similar move following the release of the Federal budget, given the fiscal stimulus it delivered).

• The RBA’s forecasts now suggest that the trimmed mean falls to 2.7% y-o-y by Q2 2026 (previously 2.6%) and takes until Q4 2026 to get to 2.6%.

• On growth, the RBA also revised up its forecasts a little, with GDP growth expected to be 1.7% y-o-y in Q4 2024 (previously 1.6%) and 2.5% y-o-y in Q4 2025 (previously 2.3%). A key driver was an expectation that public demand and household consumption would be stronger than previously thought.

• On the jobs market, the RBA expects the unemployment rate to rise to 4.4% in mid-2025, 0.1ppts higher than previously expected, which would continue to be a gradual loosening.

• Importantly, the RBA also views that the there is less capacity than previously thought. The RBA noted in its statement that the ‘gap between aggregate demand and supply in the economy is larger than previously thought’. Considering this, alongside the higher GDP growth profile, a higher underlying inflation profile and longer ‘time-to-target’, and a jobs market still only gradually loosening, it appears that the RBA’s primary concern is the possibility that inflation stays too high for too long.”

• “The implied return to the inflation target is described as “slightly slower” than the prior forecast round. This leans on the idea of “sustainable” achievement which is indeed pushed out, even though headline %oya inflation breaks fleetingly below 3% sooner. The longer journey follows from firmer domestic demand forecasts and also “a judgement that the economy’s capacity to meet that demand is somewhat weaker than previously thought”. That judgement regarding the “gap between aggregate demand and supply” is an observational one: inflation has stayed above target and the labour market has shown “ongoing strength”.”

• “The board argues “policy will need to be sufficiently restrictive” until it “is confident that inflation is moving sustainably towards the target range.” The balance in this comment leaves us comfortable with our call for a first easing in February 2025: the leadership doesn’t need annual inflation in the target band to start easing (“moving sustainably towards…”) but with policy starting less restrictive than others (e.g. Fed, RBNZ) the hurdle to start is still higher than other central banks.”

ING: “Last month, we took a chance and forecast a rate hike at this meeting. No sensible central bank would have been hiking rates against the market turmoil backdrop, and we are not surprised or disappointed that the RBA left

its cash rate unchanged at 4.35% at today’s meeting. The overwhelming impression given by Governor Bullock’s statement accompanying this decision is that inflation is not where she would like it to be, and it is also taking far

longer to tame.”

• “The full statement warrants a good read and highlights some of the downside risks as well, but the net impression is that the RBA is still more concerned about upside inflation risks than downside activity disappointments. This may not be a last gasp for rate hike enthusiasts.”

• “In our view, even a solitary December cut looks too much too soon, and our revised forecasts for cash rates, which will trim down to 4.35% our peak cash rate forecast (we previously had assumed this would reach 4.6%), will not consider rate cuts until sometime in 2025.”

J.P.Morgan: “Today’s RBA meeting gave the first structured response from a DM central bank to post-NFP market volatility. The board left the cash rate steady at 4.35% as expected. The statement, finalized today, read as if it

could have been prepared a week ago and underplayed any recent changes in the US/global backdrop to focus on domestic issues.”

• “The board signalled that its focus remains on domestic inflation, and it isn’t as enthusiastic as markets have been with respect to progress in the last CPI print. In the concluding sections, the board note “data

have reinforced the need to remain vigilant to upside risks to inflation”, a clear pushback to pricing of cuts in the front 2-3 meetings. Governor Bullock also stated several times in the presser that “a near-term reduction in the cash rate doesn’t align with the board’s current thinking”, and that this week’s decision was between a hike and a hold.”

TD Securities: “The RBA left the Target Cash Rate on hold today at 4.35% and the Statement delivered as we expected, reiterating it would be some time yet before the Board would be confident that inflation would return sustainably in the target range. However, the Governor delivered a press conference that was more hawkish than the Statement and her prior appearances.

• Change of Call: For some time we have been apprehensive of our call for the first RBA’s cut to be delivered in Feb’25 and following today’s developments now expect the first cut in May’25. There is a risk the RBA could be on hold for longer if we take a strict interpretation of the RBA’s prior actions.”

Westpac: “The RBA left rates on hold in August as we expected, but their rhetoric and view of aggregate demand were surprisingly hawkish. Given the Board apparently does not see its way to cutting rates this year, our

expectation of a November rate cut is unlikely to be achieved. Our rate forecasts are under review while we assess the basis for the RBA’s own economic outlook.”

• “This had been our expectation as well. Inflation still looks to be on track to return to the target range next year; the RBA’s forecasts for trimmed mean inflation are not materially different to our own, though its near term headline inflation forecasts are a little higher. While in our view, this expected decline in inflation sets up the conditions for the RBA to start scaling back some of the current restrictiveness in the stance of monetary policy later this year, the Board does not expect that start to occur that soon.”

• “The statement and forecasts were more hawkish than we expected, reflecting a surprisingly bullish view on domestic demand. In the media conference after the decision, the Governor went one step further, all but ruling out rate cuts this year by stating explicitly that: ‘A near-term reduction in the cash rate doesn’t align with the Board’s current thinking.’”

• “Central to the RBA’s view on inflation is that it has revised down its view of the near-term outlook for productivity. This is largely because of a mechanical adjustment driven by average hours worked remaining a bit stronger than previously thought, but also because the RBA’s forecasts for business investment are not strong enough to result in much catch-up in the stock of capital per worker.”

• “While the Board understandably wants to continue to be seen to be resolute on inflation and vigilant to the upside risks, its current view of the outlook hangs on a number of strong assumptions. It was always going to be the case that the RBA would be among the last of its peers to start cutting, given it did not raise rates as far. However, recent evolutions in its analytical framework and rhetoric increase the risk that it will now not pivot in time.“