Reserve Bank of Australia to keep key interest rate at 4.35% for rest of year

All 37 economists expect the Reserve Bank of Australia to hold the cash rate at 4.35% on August 11.

BENGALURU, Aug. 6 (Reuters) - The Reserve Bank of Australia will keep its policy rate unchanged on Tuesday and for the rest of 2026 as policymakers assess how hikes earlier this year are affecting the economy, a Reuters poll found.

Since February, the RBA has raised the cash rate by 75 basis points to 4.35%, fully reversing last year's easing to try and contain price pressures building even before the U.S.-Israeli war with Iran pushed oil prices significantly higher.

But inflation has eased as higher borrowing costs slow economic activity and oil prices fell sharply in June.

Annual inflation, at 4.0% last quarter, remains well above the RBA's 2%-3% target range but while the core measure rose to 3.6% it was below both the central bank's and economists' expectations.

Many economists say underlying price momentum is easing, giving policymakers reason to remain in wait-and-see mode.

All 37 economists polled from July 31 to August 5 expected the RBA to leave its key rate unchanged at 4.35% on Tuesday.

"It looks like inflation, although it is high, is trending in the right direction. And there are signs of easing demand pressure in the economy," said Nick Stenner, head of Australia and New Zealand economics at BofA.

"With policy in restrictive territory I think they've got the evidence they need to be patient and just hold the cash rate for the time being."

Three-quarters of economists, 27 of 36, forecast no change from 4.35% before end-December, compared to 64% expecting that last month. A 45% minority of economists ahead of June's meeting were expecting at least one hike.

Australia's major banks, including ANZ, CBA, NAB and Westpac, expected the cash rate to have already peaked.