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Free AccessInflation Revised Up, Growth Down, 25bp Rate Hikes Continue
The RBA raised rates 25bp, as was widely expected. This brought rates to 2.85%, their highest since April 2013. The key parts of the statement were unchanged with the main difference being the addition of some updated forecasts to be published in the “Statement on Monetary Policy” on November 4.
- The RBA’s end-2022 CPI inflation expectations have been revised up to 8% (August forecast 7.75%) with inflation moderating over 2023 to a higher end-year rate of 4.75% (4.3% previously), and end-2024 revised up to “a little above 3 per cent.” The Board expects wages to increase further in response to inflation and the tight labour market.
- GDP growth was revised down and the meeting statement noted that “growth is expected to moderate over the year ahead”, due to weaker global growth, the end of the Covid-services bounce and the impact on households of tighter monetary policy. GDP is expected to come in around 3% this year (previously 3.2%), and 1.5% in 2023 (previously around 2%) and 2024 (1.75%).
- The growth moderation drives a gradual pick up in the unemployment rate. The near term forecast of stable unemployment is unrevised but it is likely to be moderated up to “a little above 4 per cent” in 2024. The statement contributed the slowdown in employment growth to the tightness of the labour market.
- Surprisingly, the inflation comments in the statement were unchanged. It continued to say that global factors “explain much” of inflation being “too high”. There was no alteration to reflect the broadening of inflation pressures and the acceleration of the domestic components in the Q3 CPI data.
- The guidance paragraph at the end of the statement was essentially unchanged. Rate moves continue to depend on “the incoming data”.
- See the statement here.
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