ANZ expects the Reserve Bank of Australia (RBA) to keep interest rates on hold at its upcoming meeting.
The major is also anticipating that the nation's central bank will continue to hold for the remainder of the year as inflationary pressures ease and unemployment edges up slightly.
"Although we expect the board to retain a hawkish bias and keep open the possibility of further tightening," economists at the major bank wrote in a note.
"One issue likely to remain on the RBA's radar is the persistence of capacity constraints in
parts of the economy, particularly construction," the note continued. "The construction pipeline has reached a record high, raising the risk that competition for scarce resources keeps construction-related inflation elevated even as broader inflation moderates."
The RBA will hold its next meeting on monetary policy on 10 and 11 of August. So far this year, the central bank has lifted the official cash rate (OCR) three times, taking it to its current level of 4.35%.
The tightening cycle has added pressure on mortgage holders and property investors already contending with higher living costs, while markets have been watching closely to see whether the RBA would continue raising rates to curb inflation.
There are also recent tax changes that have impacted market sentiment, a stubborn housing shortage and continued global uncertainty, which has increased oil prices globally.
The latest consumer price index (CPI), however, brought some relief, easing expectations of another increase. Although inflation remains above the RBA's 2% to 3% target range, the June data came in below the central bank's forecast.
Headline CPI rose 3.8% in June, down from 4% in May, and below the bank's forecast of 4%. Trimmed mean inflation was up 3.6%, unchanged from the year leading up to May.
Unemployment has also held steady at 4.4% in June, the same as May.
On the ground, brokers are optimistic that the RBA will also hold steady later this month.
"I hope to see the RBA hold the cash rate at its August meeting, as we need a period of stability rather than moving too quickly in either direction," Bianca Patterson, mortgage broker and finance specialist at Perth-based Calculated Lending, told Australian Broker. "While borrowers would welcome some interest rate relief, there has not yet been enough time to see the full effect of the three consecutive rate rises, followed by the decision to hold in June.
"Holding rates again would give the economy more time to absorb those increases and give the RBA a clearer view of their impact before making its next decision," she continued. "With the effects still flowing through to borrowers and the broader economy, cutting rates only two [meetings] after three consecutive rises would feel premature, particularly if any significant movement in the data could be temporary."
