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MNI RBA Preview - December 2022: 25bp Hike, Watch Guidance

EXECUTIVE SUMMARY

  • The RBA is widely expected to hike rates another 25bp at its December 6 meeting bringing the total tightening for the year to 300bp and the cash rate to 3.1%. This would be around the Board's estimates of neutral.
  • The AUD OIS market only has around 19bp or a 75% chance of a 25bp hike priced in for the December meeting.
  • RBA Governor Lowe noted in recent comments that current wage inflation is still consistent with the inflation target but that the RBA is monitoring it closely and doesn’t want it to rise too much further. He warned of the risk of a wage-price spiral.
  • With inflation well above target and the labour market very tight, it is still unlikely the RBA will pause in the coming months, but any changes or lack thereof to the forward guidance should give some more clarity to the outlook for the cash rate.

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