‘Very welcome’: RBA deputy governor hints at August rate cut

A key Reserve Bank official has hinted at an August rate cut after welcoming new inflation figures showing the lowest rate since 2021.

One of the Reserve Bank of Australia’s most senior officials has given the strongest signal yet that there could be much-needed rate relief for struggling homeowners in August.

RBA deputy governor Andrew Hauser used his fireside chat with Barrenjoey chief economist Jo Masters to highlight the importance of the central bank being “predictable”.

In his first public appearance since the RBA shocked the market by holding the cash rate in July, Mr Hauser said Wednesday’s consumer price index data was “very welcome”, as it had now fallen into the RBA’s target range for six months.

RBA deputy governor Andrew Hauser said the fall in inflation was ‘very welcome’. Picture: NewsWire / Max Mason-Hubers

“We were looking for more evidence that inflation was moving sustainably back to the midpoint, and we’ve had another piece of that jigsaw yesterday,” he said.

Betashare chief economist David Bassanese said near enough was good enough for a rate cut, as annual trimmed mean inflation fell to 2.7 per cent for the 12 months until June, the lowest figure since December 2021.

“Underlying inflation is inching closer to the middle of the RBA’s 2 to 3 per cent target band and so justifies a further easing in what – in the RBA’s own words – a still ‘modestly restrictive’ level of interest rates,” he said.

Markets are now pricing in a 100 per cent chance of a rate cut in August. Picture: NewsWire / Nicholas Eagar

Combined with a spike in the unemployment rate that jumped from 4.1 to 4.3 per cent, markets are now pricing in a 100 per cent chance that interest rates will be reduced by 25 basis points after the RBA’s August 11-12 meeting.

This would bring the official cash rate down to 3.60 per cent.

Mr Hauser said there was a “lively debate” between the RBA board about exactly how tight the jobs market was.

“There are different views on the board about exactly how tight the labour market is, but on any measure, unemployment is historically still very low,” Mr Hauser said.

“And I spent quite a bit of time going out around Australia speaking to firms to get a sense of their economic conditions.

“And it’s quite clear that it’s easier than it was to find the right member of staff which you’re paying the going rate for, and the search process takes time.”