RBA Review: Copy and Paste Statement Suggest CPI Sensitivity Remains
![](https://adminmvp.continuumeconomics.com/storage/author/654a65d6be74c.jpeg)
RBA kept rate unchanged with copy and paste statement
RBA held the cash rate at 4.1% as most market participants are expecting. The key statement of "Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks." stays and suggest our forecast of 15bps hike remains as it seems the statement left the doors open for more tightening to come before the end of year. While some market participants may have shifted their view that RBA has done tightening, we believe the RBA will remain CPI sensitive and will hike the last 15bps when CPI spikes.
The decision is in line with RBA's rhetoric in the past quarter when they switch to become more data dependent and is patient to assess the lagging effect of cumulative hikes yet keeping a close eye on inflation dynamics. We kept our forecast of terminal rate at 4.25% by year end 2023. RBA's commitment towards battling inflation has not faded with their wordings on 6% inflation being too high, especially highlighting the strength in service CPI. Yet, the room for RBA to further tighten while balancing economic growth remains minimal and we only see the RBA to tighten one last time whenever CPI spikes in the coming month. The household balance sheet has been restricted by mortgage cost and inflationary living pressure, while business are facing the tightest financial conditions in months, alongside peaking labor market. Thus, the RBA has to be very careful with their tightening steps.
Elsewhere, RBA is acknowledging economics growth to be below trend with private consumption and investment likely soft in the coming months. It is likely RBA will remain CPI sensitive in the future RBA meetings to choose whether to be on hold or dish out the remaining 15bps hike.