VIEW: CBA: Employment Report Rubber Stamps Another 25bp Rate Hike In Dec

CBA note that “the RBA have delivered a lot of tightening in a short amount of time. The unemployment rate is a lagging indicator and rate hikes work with a lag. The RBA recognises this which makes calibrating the tightening cycle challenging from here. It is a difficult task to ‘keep the economy on an even keel’ while still raising the cash rate when most of the impact of the already delivered rate hikes has yet to be felt.”

• “We think today’s labour force data rubber stamps a further 25bp rate hike at the December Board meeting, which would take the cash rate to 3.10%. And at the margin it lends support for a further 25bp rate increase at the February Board meeting next year. However at this stage we are content to leave our base case unchanged that the peak in the cash rate will be 3.10%.”
• “We believe the RBA are very aware of the risk of overtightening and inadvertently engineering a hard landing. We expect the labour market data to loosen over coming months as the lagged impact of hikes slows demand and the continual lift in foreign arrivals adds to labour supply.”