RBA On Hold, Waiting And Watching

The RBA left rates at 4.35%, as expected, at its last meeting for 2023. There was some shuffling of the statement but the content was little changed. It reiterated why rates were increased in November but then said that given “limited information received on the domestic economy”, there was “time to assess the impact” of previous tightening. The final guidance paragraph was unchanged and thus the central bank retained its tightening bias.

• There will be a lot more information before the February 6 meeting, which remains “live” for the Board to judge if inflation is slowing fast enough, including the domestic components. There will be the usual monthly releases but also Q4 CPI data on January 31. The meeting will also include updated staff forecasts. It reminded us that it remains “resolute” in returning inflation to target in a “reasonable timeframe”.
• The RBA acknowledged that the monthly CPI for October did not include “much more information on services inflation”, an area of concern given its persistence and the experience overseas. It notes though that the data “suggested that inflation is continuing to moderate”.
• The tight but easing labour market was repeated but the central bank doesn’t expect wages to “increase much further”. It reiterated though that they are consistent with the inflation target as long as “productivity growth picks up”. We will get the Q3 reading on this in Wednesday’s national accounts.
• See December statement here.