MNI BRIEF: RBA Hikes 25bp, Cuts "Months Ahead" From Guidance

The Reserve Bank of Australia warned further tightening may be needed as it hiked rates 25bp to 3.6% on Tuesday, but tempered its warning by cutting February's reference to "over the months ahead", a hint policymakers may be getting close to a pause in their tightening campaign.

The 10th consecutive hike lifted rates to an 11-year high, with the RBA acknowledging that growth "has slowed" and that recent data suggested inflation had peaked.

Softer inflation and growth data prompted the RBA to tone down the hawkishness in February's statement, where it warned that further hikes would be needed "over the months ahead".

"The Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary," the accompanying statement said on Tuesday.

The RBA noted a recent easing in labour shortages and said wages growth suggested "a lower risk of a cycle in which prices and wages chase one another."

The change in tone triggered a repricing of peak rate expectations, with overnight index swaps pointing to a terminal rate of 4% compared to 4.15% before the decision. (See RBA : RBA Terminal Rate Pricing In To 4.00%). The Australian dollar fell after the decision. (See AUD : Lower Eyeing 0.6700 Test, AU-US 2yr Spread Widens to -150bps)