1 Nov 2022
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The Reserve Bank of Australia (RBA) Board increased the cash rate by 0.25% to 2.85% at its November meeting.
November 2022 - Article provided by PSK's Chief Investment Officer Chris Lioutas.
The Reserve Bank of Australia (RBA) Board increased the cash rate by 0.25% to 2.85% at its November meeting.
The move was fully priced into markets, but there was room for them to increase by a larger increment given the latest inflation print came in higher than expected.
Instead, the RBA chose to focus on the lagged effect of the increase in rates which is yet to be felt in mortgage payments, revising down their economic growth expectations for this year and next, whilst remaining watchful of the uncertainty in the outlook for the global economy which continues to deteriorate.
The only other real change to their statement from the previous month was a revision to their inflation expectations which they now expect to peak at around 8% later this year. They still expect inflation to decline aggressively in 2023, but not return to the 2-3% target until after 2024.
The Board still expects to increase interest rates in the period ahead whilst re-emphasising their commitment on returning inflation to target. At this stage, we expect another rate rise in December, and then another 1-2 rate rises early next year. But as always, the size and timing of any rate movements will be data dependent.
Post the announcement, Australian shares moved higher, the Aussie dollar fell against the US dollar, and government bond yields fell (prices higher).
As always, if you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser
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.
