Delay In Return To Target Likely To Drive Rate Hike

The RBA decision is coming up at 1430 AEDT and economists expect a 25bp rate hike today (see MNI RBA Preview - November 2023). Recent inflation developments, including in core measures, and economic resilience risk the RBA not achieving its price stability target within the “reasonable timeframe”. Governor Bullock said that there is a “low tolerance” for any delay. This meeting will include updated staff forecasts, which will be key to the decision.

• We don’t expect the final guidance paragraph to be significantly changed with the tightening bias and data dependency retained so that the Board can keep its options open as it is unlikely to be confident yet that it has contained inflation.
• The statement is likely to include an idea of where the forecasts are now with the details to follow in the Statement of Monetary Policy on Friday.
• There will also be an explanation of why the decision was made and if in fact there is likely to be another tightening. Increased inflation risks and the likely delay in achieving target will probably be mentioned if the RBA hikes.
• The reasons given for leaving rates unchanged at the last four meetings are still valid and so there is a distinct possibility that the Board continues to pause in November.
• The statement can be found here.