Quarterly Statement on Monetary Policy Coming Up, Updated Forecasts In Focus

The upcoming RBA SoMP will be eyed for further insights into Tuesday's +25bps hike.

• Focus will be on the RBA's updated forecast projections, although some detail was already released in Tuesday's statement.
• The peak in the unemployment within the forecast horizon was revised down 0.25pp to 4.25%, below the NAIRU estimate. CPI is seen inflation returning to the top of the target band by the end of 2025 rather than “within” it. Q4 2024 inflation is now expected to be 0.25pp higher at 3.5%.
• More broadly, as we noted in our RBA review (see this link), there were six clear references to inflation risks, making Tuesday's statement seem hawkish, yet the first line in the final paragraph was changed to “whether further tightening of monetary policy is required” from “some further tightening of monetary policy may be required”, plus the extension of “a reasonable timeframe”, reads dovish despite the Board remaining “resolute” in returning inflation to target.
• Looking ahead, Q3 WPI (Nov 15), employment (Nov 16), retail sales (Nov 28) and CPI (Nov 29) are key data before the December 5 meeting but since there are no new forecasts even upside surprises are unlikely to push another hike. Watch services, core and house prices though. But February is definitely live with Q4 CPI on January 31 and revised staff forecasts available. If those projections show inflation at target not until 2026 (Q2:26 will be added), then expect more tightening. Either way “higher for longer” inflation means rates are high for longer.