Reserve Bank of Australia left its cash rate unchanged and didn’t signal any change in policy is immininet.
Check these out, lifted from the barrage of headlines below:
- Underlying inflation remains too high
- Inflation is not expected to return sustainably to the midpoint of the target until 2026
- The labour market remains tight, and demand for labour is strong.
This is not a central bank signalling a rate cut. Higher for longer is the read here.
If there is anything encouraging for those looking for rate cuts its that the Bank revised growth and underlying inflation forecasts down slightly. Analysts were looking for a February rate cut going into this meeting while market pricing was around May. I don’t think those expectations will hold in the face of today’s policy statement from the Bank (see higher for longer remark above đŸ˜‰ ).
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Headlines via Reuters:
- The board will continue to rely upon the data and the evolving assessment of risks.
- Underlying inflation remains too high.
- Inflation is not expected to return sustainably to the midpoint of the target until 2026.
- Policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range.
- While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high.
- The board is not ruling anything in or out.
- Growth in output has been weak.
- A range of indicators suggest that labour market conditions remain tight.
- Taking account of recent data and the updated forecasts, the board’s assessment is that policy is currently restrictive and working broadly as anticipated.
- Wage pressures have eased somewhat, but labour productivity is still only at 2016 levels, despite the pick-up over the past year.
- demand still exceeds supply, although the gap is narrowing.
- Core inflation remains elevated, with service inflation expected to decline only gradually.
- The labour market remains tight, and demand for labour is strong.
- Household consumption has picked up by less than expected and is likely to be flat in Q3.
- Policy in Australia is not as restrictive as in most peers, even after recent rate cuts abroad.
- The RBA has lowered forecasts for growth in GDP and household consumption and has trimmed CPI and core inflation projections.
- The RBA sees CPI at 2.6% in December, 2.5% in June 2025, 3.7% in December 2025, and 2.5% in December 2026.
- The RBA sees trimmed mean inflation at 3.4% in December, 3.0% in June 2025, 2.8% in December 2025, and 2.5% in December 2026.
- The RBA projects GDP growth at 1.5% in December, 2.3% in December 2025, and 2.2% in December 2026.
- The RBA sees unemployment at 4.3% in December, 4.5% in December 2025, and 4.5% in December 2026.
- The RBA has revised up its employment growth forecast to 2.6% in December and 2.2% in June 2025, slowing to 1.3% by the end of 2026.
- The RBA sees wage growth at 3.4% in December, 3.2% in December 2025, and 3.1% in December 2026.
- It is difficult to sustain wage growth at the current level without a pick-up in productivity.
- The RBA has trimmed population growth forecasts, reflecting tougher foreign student entry rules.
- The outlook for China has been revised higher due to Beijing’s stimulus plans.
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Background to this:
- The RBA meeting next week marks a year of unchanged cash rate at 4.35% – no cut until 2025
- Its unanimous, Reserve Bank of Australia to hold cash rate at 4.35% at next week’s meeting
- Credit Agricole: What we expect from the November RBA meeting
- Barclays: What we expect from the November RBA meeting
Reserve Bank of Australia Governor Bullock press conference is coming up at 0430 GMT / 1330 US Eastern time
This article was written by Eamonn Sheridan at www.forexlive.com. Source