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MNI RBA Review - October 2022: Surprise 25bp As Terminal Rate In Sight

EXECUTIVE SUMMARY

  • The RBA unexpectedly raised rates by 25bp to 2.60% at its October meeting, as opposed to the 50bp widely expected by both the market and economists. It is the first major central bank to pivot. It slowed the pace of tightening due to the amount that had been done in “a short period of time.
  • The Bank expects to increase rates further “over the period ahead” (rather than “months ahead”). A 25bp hike is likely to come at the November 1 meeting, which would mean that the RBA has hiked 50bp between Fed meetings.
  • With the Board stating that inflation “is too high,” another 25bp rate rise is likely in December, but with the following meeting not until February, there’s time to pause and assess activity and inflation developments.
  • The market is now expecting the cash rate to peak just above 3.5%.
  • Click to view full review:RBA Review - October 2022.pdf

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