MNI RBA WATCH: New Governor Points To Oil Prices
A new governor offers a steady hand, as the RBA keeps the cash rate on hold.
Newly-appointed Reserve Bank of Australia Governor Michelle Bullock made only slight changes to Tuesday’s official statement, upgrading concerns about oil prices, following the board’s decision to hold the cash rate steady for a fourth consecutive month at 4.1%.
While most of the statement remained unchanged, Bullock noted that goods price rises had eased, while services continued to increase. The governor also highlighted oil prices, noting that they had risen noticeably, as the board maintained its tightening bias from the Sept 5 statement that further hikes “may be required”.
Australian government commonwealth bonds were 1-2bp richer after the decision (See Cheaper But Slightly Richer After The RBA Decision), while the RBA-dated overnight index swaps market changed little, with the peak rate of 4.3% expected mid-2024.
Australian Institute of Petroleum data shows average national retail fuel prices have risen steadily since July (see chart). MNI reported earlier in the month increased petrol prices, alongside a falling Australian dollar, weakening yuan and slowing China could lead the Reserve to consider an additional hike in November.
While headline monthly CPI increased to 5.2% over August from July's 4.9%, trimmed-mean inflation fell to 5.5% from the previous month’s 5.8%. The RBA board, however, will want to base any rates decision on the less volatile and more robust quarterly data due Oct 25 and its own refreshed metrics out Oct 4 when it next meets Nov 7.
The RBA may also want to examine Australian Bureau of Statistics wages data, due Nov 11, before moving further due to its past statements on labour and weak productivity.
Bullock, whose governorship started Sept 18 after her predecessor Philip Lowe’s term was not extended, will provide greater detail on the board’s decision at the Australian Financial Security Summit in Sydney on Oct 18, while the RBA will release the October meeting minutes on Oct 17.
MNI had reported in July that Bullock’s time as governor would likely yield little change. (See MNI: Bullock Unlikely To Push Major Cultural RBA Shift) She has worked at the RBA for about 40 years.