Modest Bid As It Becomes Clear The RBA Discussed No Hike Earlier This Month

YM & XM futures are incrementally firmer vs. pre-RBA meeting minute levels, but little changed in the grand scheme of things, with most of the pre-release cheapening holding.

• The minutes revealed that “the Board considered several options for the cash rate decision at the December meeting: a 50 basis point increase; a 25 basis point increase; or no change in the cash rate.” This represented the first such discussions re: no change in monetary policy settings since the current tightening cycle got underway, at least when consulting the minutes of meetings (and is probably the source of the very modest bid outlined above). We highlight that as part of its decision-making process the Board noted that “no other central bank had yet paused.”
• The Board stressed that “a range of options for the cash rate could be considered again at upcoming meetings in 2023. The Board did not rule out returning to larger increases if the situation warranted. Conversely, the Board is prepared to keep the cash rate unchanged for a period while it assesses the state of the economy and the inflation outlook.”
• When it comes to the domestic labour market, “firms in the Bank’s liaison program continued to report that labour availability remained a key challenge, although there were tentative signs this had started to ease a little”… “A range of more timely measures – such as recently lodged enterprise agreements and information from the Bank’s liaison – indicated that wages growth had continued to pick up in the December quarter. Around 35% of firms in liaison had reported wage increases of greater than 5% in October and November.”
• On inflation, he Bank noted that “while the easing in the monthly pace of inflation had been welcome, the monthly indicator was still new and needed to be interpreted with caution.”