The RBA are back at it this afternoon, with the consensus that we are back to rate, with markets pricing it at over a 70% chance, and most economists tipping an increase.
While an increase would certainly be justified, I think the RBA will find enough excuses to sit on their hands today:
🙈 While inflation missed the RBA’s forecasts, the miss was relatively small (being only 0.2% on headline, and 0.1% on quarterly inflation).
🙈 Inflation does appears to be slowing on a monthly, trimmed mean, basis (0.33% in Oct, 0.26% in Nov, 0.23% in Dec)
🙈 The AUD had risen significantly over the past couple of months against the USD and on a trade weighted basis. This will do some work to slow tradable inflation.
🙈 A single increase isn’t really an option, moving now effectively locks in a second hike over the next few months, which could be excessive when other factors already appear to be slowing inflation.
We will find out this afternoon which way the RBA moves, and it will be interesting see how they justify their decision, whichever way they go.