The tenure of RBA governor Michele Bullock has commenced with the Board holding the cash rate steady at 4.1% (and the Exchange Settlement rate at 4%). This was the 4th meeting in succession in which rates have been left on hold, with today's decision announced in a near-identical statement to the one published after the previous meeting. The RBA is proceeding cautiously as the effects of its tightening cycle are becoming more visible, though it maintains more will be done if required.
In essence, today's meeting looks to have been straightforward. Key data received over the past month has conformed to the RBA's previous assessments, allowing it to extend its pause. The outlook is for inflation to cool over the next couple of years, returning to the 2-3% target band in late 2025 as growth slows below trend and unemployment rises gradually. That outlook is due to be reassessed next month when the RBA will publish new economic forecasts. However, unless the inflation outlook deteriorates, it is hard to see why the Board would not remain on hold in November. Inflation data for the September quarter at the back end of the month (25/10) will hold the key.
It is no surprise that the Board came out of today's meeting retaining the line that "some further tightening of monetary policy may be required..." conditional upon "the data and the evolving assessment of risks". Domestically, the key uncertainties are around household consumption and wage-price dynamics as tighter monetary policy takes its full effect. Offshore, risks to China's economy from the property market continue to be monitored closely by the RBA.
