7 Nov 2023
The Reserve Bank of Australia (RBA) Board has again decided to lift the cash rate by 0.25% to 4.35% at its November meeting.
November 2023 - Article provided by PSK's Chief Investment Officer Chris Lioutas.
The decision became largely expected in the weeks leading up to this meeting with strong economic data forcing new governor Michele Bullock’s hand.
With the first increase in rates since June, the statement took a different tone, notably:
- Inflation proving more persistent than expected a few months ago
- Progress on inflation continuing to decline looks to be slower than expected
- Adjustments higher to Bank’s inflation forecasts – 3.5% by the end of 2024; top of the 2-3% target by the end of 2025
- Data the Board received since their August meeting suggests that the risk of inflation remaining higher for longer has increased
- Services inflation is the main concern, with conditions in the labour market remaining tight and house prices continuing to rise
- Expectations of a more moderate increase in unemployment to 4.25% (rather than 4.50%)
- Added concerns regarding the implications of conflicts abroad on the global outlook
The Board signed off with the usual commitment to returning inflation to target and that some further tightening of monetary policy might be necessary depending on data and the evolving assessment of risks. As we have previously noted, the RBA remains data dependent on any future rate moves, and their patience clearly wore thin following recent data releases which showed inflation not falling fast enough and house prices re-accelerating higher, spooking them into action.
Following their announcement, Australian equities rose, the AUD/USD fell, and Australian bond prices rose (yields lower). Interesting moves following a rate rise and given the rate increase was largely expected.
As always, if you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
