RBA’s Decision Preview: Further tightening after four pauses in a row

After four consecutive pauses, the Australian central bank (RBA) is anticipated to start tightening again during its Melbourne Cup meeting on Tuesday. Whether Governor Michele Bullock maintains her recent hawkish rhetoric, which suggests more interest rate hikes, will be the main focus of the RBA meeting.

According to the way the market is currently positioned, Tuesday’s 25 basis point increase to the Official Cash Rate (OCR) by the Reserve Bank of Australia is certain. Following a four-month break from the tightening cycle, the RBA is anticipated to raise the interest rate from 4.10% to 4.35% when the decision is made at 3:30 GMT. The major four Australian banks—ANZ, CBA, Westpac, and NAB—modified their demand for an increase in the RBA rate in response to the rebound in inflation and hawkish commentary from the RBA policymakers.

The Consumer Price Index (CPI) increased by 1.2% in the third quarter, according to data from the Australian Bureau of Statistics (ABS). This increase was higher than the 0.8% increase in the previous quarter and exceeded market expectations of 1.1%. The CPI increased 5.6% year over year in September alone, from 5.2% in August.


The trimmed mean, a closely watched indicator of core CPI, increased 1.2% in the third quarter compared to 1.1% expected. In the meantime, Australian retail sales increased for the first time in four quarters from July to September, rising 0.2% QoQ from the previous 0.6% decline. The RBA policy announcement is expected to cause significant movements in the Australian dollar (AUD), given the heightened expectations of an interest rate hike.

Traders will be closely examining the language of the RBA policy statement to determine whether Governor Bullock leaves the door open for additional rate hikes.