The RBA is back with another rate decision today, and while I expect they will continue to valiantly sit on their hands, they should be increasing rates again to 5.60%
The case for hiking is still strong:
⚖️ The cash rate at 4.35% is barely restrictive in real terms. ⚖️ While headline CPI has moderated, it remains well outside the 2 to 3% target band. ⚖️ Domestic non-tradables inflation is running at 4.9% YoY and has been rising, a clear indictor that domestic price pressures remain high. ⚖️ Fuel excise reverted to the full indexed rate of through July and August. The resulting hike in bowser prices will take time to flow through to inflation figures, but its going to result in upward pressure on inflation. ⚖️ Unemployment remained low at 4.4% in June, with the economy continuing to add jobs.
To me, the case for a further hike is pretty clear. Inflation has been well outside the target band for far too long. It last touched the target range roughly a year ago and that was only a brief flirtation not sustained low inflation. The recent decline in headline inflation was mostly fuel driven and that’s a price change that has already unwound. Underling inflation has remained stubbornly above 3%.
I suspect we will instead see a relatively hawkish hold today.