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Australia Monetary Policy December 2023

Australia: RBA stands pat in December

At its monetary policy meeting on 5 December, the Reserve Bank of Australia (RBA) left the official cash rate (OCR) unchanged at 4.35%. The decision followed a 25 basis point hike at its November meeting and was largely expected by markets.

The Bank decided to leave the monetary policy stance unchanged as inflation expectations remain consistent with the 2.0–3.0% inflation target range and to be able to assess the impact of previous tightening on demand, inflation and the labor market. Moreover, inflation continued to ease in October, while conditions in the labor market have worsened in recent months, although they remain strong.

The Bank reiterated that it “remains resolute in its determination to return inflation to target [within a reasonable timeframe] and will do what is necessary”. The path of future monetary policy will depend on data and the evolving outlooks for inflation, domestic demand, the labor market and the global economy. Our panelists expect the RBA to start easing its policy stance next year as inflation moderates.

The next monetary policy meeting is scheduled for 5–6 February 2024.

Commenting on the outlook, UOB’s Alvin Liew stated:

“We expect the RBA to keep the peak policy rate of 4.35% in H1 2024. Thereafter, we expect the first rate cut to take place in Q3 2024. We are penciling a total of 60-bps cuts next year, to bring the RBA cash rate to 3.75% by Q4 2024.”

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