Cheaper, RBA Leaves Policy Unchanged, Doesn't Rule Out More Hikes

ACGBs (YM -7.0 & XM -8.0) are 2-4bps weaker and at Sydney session lows after the RBA left the cash rate unchanged at 4.35%, as widely expected. However, the statement was at the hawkish end of the spectrum. From the concluding paragraph of the statement:

• "Returning inflation to target within a reasonable timeframe remains the Board’s highest priority.”
• “The Board needs to be confident that inflation is moving sustainably towards the target range. To date, medium-term inflation expectations have been consistent with the inflation target, and it is important that this remains the case.”
• “While recent data indicate that inflation is easing, it remains high.”
• In terms of forecast details and assumptions: the cash rate is at its peak and holds there till June; assumes a 3.9% cash rate in Dec‘24, 3.4% Dec’25; Unemployment Rate peaking at 4.4% in mid-25; and Inflation at 2-3% target in 2025.
• There will be a press conference at 1530 local time.
• Cash ACGBs are 5-6bps cheaper on the day, with the AU-US 10-year yield differential unchanged at +2bps.
• Swap rates are 5-7bps higher on the day, with the 2s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -8.
• RBA-dated OIS pricing is 1-4bps firmer across meetings after the RBA decision.