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MNI RBA WATCH: Hold Likely As Reserve Awaits Fresh Data

(MNI) Melbourne

The Reserve Bank of Australia will consider leaving the cash rate unchanged at 4.35% when it meets on Dec 5 as it awaits fresh data following an easing in the monthly inflation series, despite Governor Michele Bullock’s recent hawkish turn in the fight to pull CPI below the 2-3% target.

While the RBA and Bullock have stressed the higher-for-longer narrative over the past month with the last Statement on Monetary Policy and meeting minutes following November’s hike preparing the market for a least one more increase, CPI ticked lower than expected in October, rising only 4.9% from the prior month’s 5.6%, while trimmed CPI increased 5.1%, down from September’s 5.5%. The RBA typically sees the monthly series as more volatile and will want to analyse another quarterly CPI result due Jan 31 before raising the cash rate again.

The October read did not include services inflation, which the RBA sees as a key driver of domestic price rises and which will be included in the November and December results. Market pricing implies a 9% chance of a December hike, and a 27% possibility of a 4.4% peak in rates by February. (See MNI POLICY: RBA's Fresh Forecasts Embed Strong Rates Profile)

In another sign of a slightly weaker economy, unemployment increased 20bp to 3.7% in October, bucking September’s unusually strong print, and while employment was strong at 55,000, full-time jobs accounted for only about one third.


The RBA lifted the cash rate by 25bp to 4.35% on Nov 7 following an upside surprise to CPI and stronger-than-anticipated Q2 GDP. (See MNI: RBA Higher-For-Longer Shift Follows CPI Surprise-Ex Staff)

Next Tuesday represents the last monthly meeting before the RBA switches to a six-week schedule in 2024. The board and monetary policy will also undergo further reforms next year, while former Bank of England Executive Director Andrew Hauser will join as deputy governor sometime in Q1 ahead of the creation of the monetary policy board, on which he will likely hold a key voting seat.


The Organisation for Economic Co-operation and Development and the International Monetary Fund have given conflicting signals on the RBA’s likely policy path over recent weeks.

The OECD believes GDP growth will slow to 1.4% in 2024 from 1.9% in 2023, as cost of living pressures force consumers to cut back and housing investment softens, making a further hike unnecessary. The IMF, however, has warned fiscal spending – particularly infrastructure – remains high and could push the RBA to act. The IMF noted inflation may not return to target until early 2026, later than the RBA’s late-2025 timeline.

Local economists and ex-policymakers have echoed the IMF’s caution, noting high immigration levels are adding to demand, particularly housing.

Bullock will lay out the board's decision in greater detail when she speaks at an industry conference in Sydney on Dec 12.

Daniel covers the Reserve Bank of Australia and the Reserve Bank of New Zealand and leads the Asia-Pacific team.
Daniel covers the Reserve Bank of Australia and the Reserve Bank of New Zealand and leads the Asia-Pacific team.

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