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MNI RBA Preview - February 2023: Inflation To Drive Another 25bp

EXECUTIVE SUMMARY:

  • The RBA is widely expected to hike rates 25bp to 3.35% at its February 7 meeting given the elevated Q4 CPI data that showed an increase in domestically-driven inflation pressures. Thus, the focus is likely to be on any change in tone of the statement and indications of how the RBA's forecasts have changed. The official forecasts are published in the Statement on Monetary Policy on February 10 but the flavour of the revisions is usually in the meeting statement.
  • The AUD OIS market has 23bp or a 92% chance of a 25bp hike priced in for the February meeting and a terminal rate of 3.73% for July 2023. Bloomberg consensus has the peak in rates at 3.6%.
  • Another hike in March is also likely following the Q4 wages price index data on February 22. The tightening cycle could be prolonged with a pause not necessarily meaning that rates have peaked. Watch the February forecast update for when inflation is expected to be back in the target band. Governor Lowe's comments to the Economics Committee on February 17 may also give some more insight on the rates outlook.

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RBA Preview - February 2023.pdf

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