Initial Read Is Dovish When Compared To Market Expectations

The RBA left its cash rate target unchanged and announced an end to its QE scheme come 10 February, as expected.

• •The guidance passage was more dovish than the median expectation, with the central bank maintaining its reference to a patient approach re: rate rises, while underscoring projections surrounding a “gradual” pickup in wage growth and the impact of “modest” wage growth on underlying inflation.
• •The Bank pointed to continued questions re: the stickiness of higher inflation, even though it now looks for a higher near-term peak in underlying inflation, in addition to projecting a higher underlying inflation profile in ’23.
• •The Bank was also keen to underline the notion that the cessation of its QE program does not imply that there will be a rate hike in the near-term.