Australia: RBA raises rate in November; hints at further hikes ahead
November 2, 2022
At its monetary policy meeting on 1 November, the Reserve Bank of Australia (RBA) hiked the official cash rate (OCR) from 2.60% to 2.85%. The decision matched market expectations.
The Bank raised rates again in a bid to keep inflation expectations anchored and tame inflation, which is being fueled by both external and domestic factors. Global economic conditions, faster wage growth and strong domestic demand continue to exert upward pressure on prices. The Bank expects inflation to peak at around 8.0% in Q4—increasing further from Q3’s over three-decade high—and then decline in 2023, thanks to easing global supply-side bottlenecks, stabilizing commodity prices and cooling domestic demand also due to higher interest rates. Inflation is seen averaging around 4.8% in 2023 and around 3.0% in 2024.
The Bank maintained a hawkish tone in its communiqué, stating that it “expects to increase interest rates further over the period ahead”. However, it reiterated that future monetary policy decisions will be guided by data and the evolving outlook for inflation and the labor market.
Commenting on the decision, Robert Carnell, economist at ING, stated:
“It looks more probable now that the RBA will simply stick to a 25bp rate increase pace until it believes it has taken rates high enough. That may be soon into the New Year when rates hit 3.35% or 3.6%, which they will do by January or February if we get further 25bp hikes at each meeting until then.”
The next monetary policy meeting is scheduled for 6 December.