MNI BRIEF: RBA Hikes 25bp; Sees Inflation Peak 'Around' 8%

The Reserve Bank of Australia raised rates 25bp to 2.85%, warning inflation will peak at "around" 8% later this year as it cut its growth forecasts out to 2024.

The seventh consecutive hike in rates has seen the Bank lift rates by a cumulative 275 bp since it started hiking rates in May from a low of 0.1%.

The RBA expects to increase interest rates "over the period ahead" but the most aggressive tightening cycle in three decades isn't expected to dampen inflation yet as it forecast a peak of "around" 8% compared to the 7.75% outlined in August's Statement on Monetary Policy. "The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market."

The Bank's central forecast for GDP was "revised down a little" to "around" 3% this year and 1.5% in 2023 and 2024. The Statement on Monetary Policy had forecast 3.2% growth this year and 1.8% and 1.7% respectively in 2023 and 2024.

The Australian dollar fell after the announcement to 0.6410. (See AUD : A$ Dips Post RBA). Market-based pricing of the RBA's terminal rate fell, though the terminal rate is still viewed to end above 4%. (See STIR : RBA Dated OIS Lower On 25bp Hike & Bank Noting Material Increase In Cash Rate Has Been Deployed)