While not enough to push the RBA to cut this meeting, Governor Michele Bullock could tone down or drop her "not ruling anything in or out" language that has hinted at possible hikes throughout the last year.
November marks 12 months since the RBA last hiked the cash rate, by 25 basis points. Markets see little chance of a move next week and only 15% probability of a cut at the December meeting. Attention has shifted to 2025’s first decision on Feb 18, with the futures market pricing in a 31% chance of a cut to 4.22%.
CPI & OTHER DATA
While trimmed mean inflation, the bank’s preferred measure, fell 50 basis points to 3.5% over Q3, it remains too high above the RBA’s 2-3% target band to warrant a cut. The q/q result, which some former economists note is an integral factor in the RBA’s thinking, only fell 10bp over the quarter, while the weighted average increased 10bp to 0.9% q/q.
The Q3 data was largely in line with the RBA’s August forecasts. However, and more importantly, it may still not be enough for the RBA to forecast a sustainable return of underlying inflation returning to the target band, something Bullock stressed in September. (See MNI RBA WATCH: Changed Messaging Considered In Hawkish Hold)
Q3’s data showed inflation is now a largely domestically-driven affair, with rents, childcare, insurance and wages all contributing to increased services prices. (See chart)
Still, while unemployment and jobs creation have continued to show resilience, the Reserve will likely not need to see too much weakness, particularly within employment, to shift to lowering rates, once it is confident regarding underlying inflation. (See MNI POLICY: Strong Jobs Growth Still Compatible With RBA Cuts)
The RBA will meet one last time this year on Dec 10.