RBA Review: Bullock More Hawkish In Press Conference

The RBA has kept the cash rate unchanged at 3.6% in the December 4th meeting as per forecast. The inflationary picture has turned hot after the Q3 and subsequent monthly inflation figure rises above 3%, partially from previous year's energy rebate base effect but also suggest stronger underlying inflation. The statement shows economics forecast turned after the August forecast and see the RBA tilted more hawkish. The RBA did not consider hiking in the December meeting but did discuss circumstances in which the RBA might have to tighten. 

In the RBA's inflation forecast, they now see headline CPI to be above target for 2026 and trimmed mean to also be above for most part of the year. While they did not change their assumption of one more cut in 2026, they have attributed such towards "expectations derived from financial market pricing" and TWI. This suggest the RBA will be open to changing the path ahead when market pricing changes and should suggest there will be no more rate cutting, given their inflation forecast. 

In the press conference, Bullock is more hawkish than the statement. She said that a rate hike will be considered in the February meeting if the Q4 inflation report does not show any sign of inflation slowing. On balance, we feel Q4 inflation will unlikely jump higher as base effect eases. We do not see any rate changes in the coming horizon and could see 3.6% being terminal rate for a while.