MNI RBA Review - November 2023: 25bp Hike, Inflation Persistent

EXECUTIVE SUMMARY:

• The RBA hiked rates 25bp to 4.35% after leaving them unchanged for four consecutive months. The meeting included revised staff forecasts which included the peak in unemployment within the time horizon revised down 0.25pp to 4.25%, below the NAIRU estimate, and CPI inflation returning to the top of the target band by the end of 2025 rather than “within” it.
• Despite the forecast changes, the tightening bias has been toned down but each decision remains highly data dependent, suggesting that the RBA doesn’t want to tighten again but will if new information dictates it, like this month.
• Since the December meeting won't include revised staff projections, there is unlikely to be a further move then. However, February is definitely live with Q4 CPI on January 31 and revised forecasts available. If they show inflation returning to target not until 2026 (Q2:26 will be added), then expect more tightening. Either way “higher for longer” inflation means rates are high for longer.

Click to view full review:

RBA Review - November 2023.pdf