VIEW: ANZ: RBA's Smaller Rate Hike Means Cycle Will Extend Into 2023

ANZ note that “the RBA Board has delivered a dovish surprise at its October meeting. It lifted the cash rate by a less-than-priced 25bp to 2.6%. What’s more, while the Board still “expects to increase rates further over the period ahead” this is less firm than the previous reference to expecting to “increase interest rates further over the months ahead.” The RBA is the first major central bank to scale back the size of its hikes.”

• “We still expect the RBA to tighten by 25bp in November, taking the cash rate target to 2.85%. But there is a bigger question mark over whether the RBA will go again in December as we previously expected. We remain of the view, however, that the cash rate will need to move into clearly restrictive territory of more than 3% to ensure inflation does return to target. The slower pace of rate hikes now points to the tightening cycle extending into 2023.”