The Reserve Bank of Australia was the first advanced economy to reduce interest rate hikes to 25 basis points in October, and signaled at the time that future hikes may be on hold to assess the impact of rate hikes so far.
Earlier, because Australia's CPI fell to 6.9% in October, lower than expected and the previous value, suggesting that inflation may peak, coupled with the gradual relaxation of epidemic restrictions in Asia, the central bank is also considered to be gradually approaching the terminal interest rate of this round of interest rate hike cycle, and A pause in rate hikes may be seriously being considered.
The Reserve Bank of Australia stated that it did not follow the established path of interest rates and is expected to raise interest rates in the coming period. The scale and timing of future interest rate hikes are determined by data, CPI and employment. It is expected that wage growth will further accelerate, and inflation is expected to rise further in the next few months.
According to the Reserve Bank of Australia, the main risks at present include the lag in the operation of monetary policy and the deterioration of the global economic outlook.
Regarding economic expectations, the Reserve Bank of Australia stated that the road to a soft landing of the economy is still very narrow. It is expected that Australia's GDP will grow by 1.5% in 2023 and 2024, and the inflation rate in 2024 is expected to be slightly higher than 3%.
The RBA emphasized that the Committee's priority is to re-establish low inflation and bring it back to the 2-3% range over time. The current inflation rate is too high at 6.9%, and it may rise to 8% in the fourth quarter. Inflation will decline in 2023, and the inflation rate will be slightly higher than 3% in 2024.
Regarding the job market, the Reserve Bank of Australia stated that the current job market is very tight, with the unemployment rate at 3.4%, the lowest since 1974, and wage growth is expected to pick up further.
According to institutional analysis, the Reserve Bank of Australia raised interest rates by 25 basis points, which is widely expected in the market. Signs of a tight labor market and good wage growth provide a reason to raise interest rates again before the end of this year. The fact that the RBA will not meet in January also adds weight to a December rate hike, which is a natural pause.
Mortgage holders will feel the pinch this Christmas as the RBA hikes rates by another 25 basis points. The Reserve Bank of Australia has been raising interest rates since May to combat rising inflation by raising borrowing costs to cool demand for goods and services. But for mortgage holders with variable-rate loans, a 25-basis-point hike would boost their monthly payments.