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Last week I interviewed a few economists who tipped the RBA might lift rates next week. But after today’s CPI number came in lower than expected, the broad view is Michele Bullock and her team will sit tight on December 5.
According to a survey of economists by Refinitive, there’s a 10 per cent chance of a rate hike in December. That lifts to 34 per cent for February. (The RBA does not meet in January).
Here are some of the notes that have popped up in my inbox since 1130am AEDT today.
David Bassanese, chief economist at Betashares:
“Today’s lower-than-expected monthly CPI result effectively rules out the risk of a pre-Xmas interest rate hike from the RBA.
Being the first month of the quarter, the “new news” in the October CPI report mainly related to household goods – such as clothing and furniture. As such, the report confirmed ongoing notable declines in goods sector inflation – annual growth in clothing and footwear prices slowed from -0.1% to -1.5% and for household furnishings, equipment, and services prices it slowed from 2.3% to 0.4%. There was also a notable decline in annual fuel inflation due to “base effects”, with the reinstatement of the full fuel excise tax from 30 September 2022 now fully reflected in the annual calculation.”
Harry Murphy Cruise, economist at Moody’s Analytics:
“It’s hard to find bad news in Australia’s October inflation print. For starters, headline inflation dropped to 4.9% y/y, reversing course after a worrying two-month period of accelerating price increases. What’s more, measures of underlying inflation, which strip out volatile items like food and energy, fell to their lowest readings since early last year.
Still, we should be cautious. Easing rent hikes came largely from an increase in Commonwealth Rent Assistance. Without that support, rents would have jumped 8.3% y/y. Similarly, government rebates are keeping a lid on electricity price hikes. Excluding that support, electricity prices would have rocketed 18.8%.
Still, those elements don’t negate the good news. The lower-than-expected October print is an early Christmas present for households and businesses.”
Anneke Thompson, chief economist at CreditorWatch:
“Today’s monthly CPI data showed positive signs that monetary policy is taming the inflation beast.
This monthly CPI release, combined with weak consumer spending and rising numbers of unemployed people, means the RBA will almost certainly hold the cash rate steady at the December meeting.
This is good news for retailers and summer holiday makers, though consumers are likely to be wary of the fact that interest rates are likely to stay high until at least Q3 2024.”
Cherelle Murphy, chief economist at EY:
“A sub-5 per cent result on the monthly Consumer Price Index for October was welcome news today and markets duly reacted, pricing a slightly reduced chance of another rate hike.
It’s clear the 13 rate hikes that have taken the cash rate from 0.1 per cent to 4.35 per cent, are working. What is less clear, is whether inflation is falling fast enough.
Today’s data confirms Governor Michele Bullock’s comments last week that inflation has enough of a home-grown element that more rate hikes would be effective in bringing it down, if required.
The trimmed mean fell only marginally from an annual rate of 5.4 to 5.3 per cent. This is the figure that the Reserve Bank will be most focused on, as it removes one-off factors and picks up core inflation momentum.
It’s likely that the Reserve Bank will leave the 4.35 per cent cash rate on hold when the Board meets next week. But the data over Summer will be most important for the Reserve Bank’s next move in February.”
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