3 Oct 2023
The Reserve Bank of Australia (RBA) Board has again decided to leave the cash rate unchanged at 4.10% at its October meeting.
October 2023 - Article provided by PSK's Chief Investment Officer Chris Lioutas.
The decision was expected even considering the monthly headline inflation indicator pushing higher more recently.
The statement was almost a carbon-copy of the previous statement, with two exceptions:
- Fuel prices have risen notably of late – an acknowledgement that the Bank is looking through the higher monthly inflation indicator mentioned above.
- Growth in the Australian economy was a little stronger than expected over the first half of year – an acknowledgement the economy is holding up well, but that inflationary risks remain.
The Board continued to reiterate that despite growth in the first half of 2023 being stronger than expected, the Australian economy is experiencing below-trend growth, and they expect this to continue for some time.
The consistent format and messaging in this statement is noteworthy as this is the first meeting presided over by Michele Bullock, who took the reins on 18th September 2023. This consistency signals that while the RBA has a new governor, the approach to fighting inflation is unchanged.
The RBA looks likely to be done with raising rates in this cycle, so long as inflation keeps heading towards the target range of 2-3%. There remains a risk that the pace of falls in inflation starts to slow in the period ahead, as we saw in the August monthly CPI print where rising fuel costs drove the annualised rate higher than the previous month. If this trend continues, we expect the cash rate will remain at current levels for some time (ie. higher for longer).
Following the announcement, Australian equities, the AUD/USD, and Australian bond prices were flat, confirming the expected result and little change in the statement.
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.
