MNI RBA WATCH: RBA Hikes, Drops “Further Tightening” Language

DOVISH SHIFT

While the move higher was largely anticipated thanks to a material change in September’s quarterly and monthly inflation prints, ex staffers tell MNI the revision to the Reserve’s central forecast to return inflation to the top end of the target out to December 2025, and a 25bp increase to the end of 2024 estimate to 3.5%, means the board will stomach higher inflation for longer, making further rate hikes less likely.

The Reserve had initially anticipated in its August Statement on Monetary Policy that inflation would return to the top end of its target by June 2025 and 2.75% by the end of 2025. The RBA would need a more aggressive policy stance to maintain its August forecast, one former staffer told MNI.

Governor Michele Bullock also noted in her statement following the decision that further tightening would relay on data and the evolution of risks, dropping the usual line that “some further tightening may be required.”

FORECASTS AHEAD

The RBA will further detail changes to its peak unemployment, inflation outlook and other central forecasts when it publishes its updated November Statement on Monetary Policy on Friday. Leading up to Tuesday’s meeting, MNI reported the board’s decision would likely hinge on updated forecasts, while recent quarterly and CPI results had effectively “baked in” a November increase. Bullock also maintained a more hawkish tone in her communications leading into Tuesday’s hike, which lead some to believe she had paved the way for higher rates. (See MNI INTERVIEW:Neutral Update Needed After Fourth Pause- Ex RBA)

Bullock will likely reveal more on the RBA’s decision when she speaks at an industry conference in Melbourne on Nov 21.

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