A hold from the RBA with continued hawkish rhetoric is the base case CBA is pricing in, and that combination, no move but no dovish pivot either, suggests limited near term direction for AUD from the decision itself. The more market relevant signal is CBA’s expectation that the RBA will revise its unemployment forecast higher and trim both headline and core inflation projections, since a genuine downgrade to the inflation track would be read as opening the door to easing later in the cycle even if the Board maintains a hiking bias in its language. The Middle East risk CBA flags, additional cost pass through in the third quarter if the conflict escalates further, is the wildcard that could force the RBA to lean more hawkish than the data alone would justify, and this ties directly into the same Hormuz dynamics covered in our Iran war pieces. For now, CBA’s framing points to a central bank in wait and see mode, which typically keeps AUD rangebound around the meeting unless the updated forecasts or governor commentary surprise materially in either direction.
- 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)
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Earlier:
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CBA sees the RBA staying firmly on hold through 2026, but warns a Middle East escalation could still force its hand on inflation.
Summary:
- CBA expects the RBA to leave the cash rate unchanged in August and stay on hold for the remainder of 2026
- Growth is slowing as the RBA expected in May, but inflation is tracking below forecasts, the labour market has eased faster, and housing has deteriorated more than anticipated
- flags a risk that renewed Middle East escalation could drive additional cost pass-through in Q3 2026 and reignite inflation
- expects the RBA to maintain hawkish language, reiterating willingness to hike again if needed, even without an immediate case to tighten
- expects the RBA’s updated forecasts to show a higher unemployment rate and lower headline and trimmed mean inflation for the rest of 2026
- June inflation read found higher input costs were not broadly passing through to consumers, reinforcing its on-hold call
Commonwealth Bank of Australia said Sunday that it expects the Reserve Bank to leave the cash rate unchanged at its August meeting and to remain on hold for the rest of 2026, arguing the combination of economic data since the RBA’s May forecasts leaves little urgency for further tightening.
The bank’s economists said growth has slowed broadly in line with the RBA’s May projections, while inflation has tracked below expectations, the labour market has eased a little faster than anticipated, and the housing market has deteriorated more than the central bank had forecast. Taken together, CBA said, those trends give the Board room to hold rather than move again so soon.
Even so, CBA expects the RBA to keep its language firm, reiterating that inflation remains elevated and that it stands ready to raise the cash rate again if conditions warrant it. The bank pointed to a specific risk that could force the RBA’s hand, a renewed escalation in the Middle East conflict, which it said could encourage businesses to pass through additional costs in the third quarter and reignite inflationary pressure. Despite that risk, CBA said current data and its own forecasts for the remainder of 2026 do not support tightening now, and it expects the RBA to use the meeting to assess the lagged effects of its earlier rate hikes rather than add to them.
CBA also expects the RBA to publish updated economic forecasts alongside the decision, with the bank anticipating an upward revision to the unemployment rate given the labour market’s recent trajectory, and downward revisions to both headline and trimmed mean inflation for the rest of the year.
The bank’s view builds on its reading of June’s inflation data, which it said showed higher input costs were not broadly flowing through to consumer prices. CBA said at the time the result supported its call for the RBA to stay on hold through the rest of 2026, adding that the softer outcome offered some reassurance that price pressures were easing slightly faster than its own forecasts had anticipated.
This article was written by Eamonn Sheridan at investinglive.com.