Economists expect the Reserve Bank will keep interest rates on ice in August after the latest data showed that inflation is easing in line with expectations.

Central bankers will meet for the first time since mid-June this week to decide what to do with the 4.35 per cent cash rate target, which has been on pause since December.

Much has happened since then, namely June-quarter inflation figures last week that showed underlying price growth was 3.9 per cent – which is around what the RBA had anticipated.

It’s still far above the 2 to 3 per cent target band central bankers are working towards, but the RBA isn’t forecasting inflation to fall back there until late 2025, which experts think justifies the pause.

In total, 81 per cent of economists surveyed by Finder think the RBA won’t raise rates in August, while 26 per cent are expecting rates will actually be cut by December.

“There is a slowdown in inflation and economic activity, and unemployment is creeping up,” University of New South Wales associate professor Evgenia Dechter said.

“Although inflation remains persistently above the target, the RBA is likely to hold the cash rate.”

“There is no need for a change in the cash rate now,” he said.

“By November, I expect the RBA to be ready to cut.”

Most economists still think it’s unlikely the RBA will cut rates this year, particularly with inflation likely to remain above the target band in 2024 and stubborn price pressures lingering.

GSFM market strategist Stephen Miller said inflation is likely to decline in a “grudging fashion”.

“Inflation seems “stickier” in Australia than elsewhere, probably reflecting the RBA’s cautious approach (compared to peers) in raising the policy rate,” he said.

Commonwealth Bank chief economist Gareth Aird said the RBA will hold rates, but will keep its options open about where it might go in the future – including the possibility of a hike.

“Whilst the board will have welcomed the latest inflation data, there is no need to deviate from the recent script. Indeed it is too early to shift tone,” he said.

“Key economic data is all evolving in the way the RBA has recently anticipated. But the board will wish to retain full optionality on the policy outlook for the time being.”

The RBA is due to publish fresh forecasts on the economy, which are expected to assume that the cash rate has peaked and then will decline over the period ahead, Aird explained.

He anticipates “major surgery” to the forecast for headline inflation with a series of government electricity rebates set to reduce price growth by about two-thirds of a percentage point.

“The RBA is likely to calculate similar numbers to us and therefore we expect the RBA to forecast inflation to sit in the 2.75 to 3.0 per cent range over 2024-25,” Aird said.

Importantly, that is within the top part of the target band, which is why some economists are predicting an interest rate cut is on the horizon.