As widely expected, Reserve Bank of Australia (RBA) today hiked its official cash rate by a further 0.25 percentage points to 3.10% – the highest rate in over a decade. The last time Australia had an interest rate above 3 per cent was in October 2012.
On the surface, the headline decision to raise the rate by 0.25% is very much in line with what was widely expected. But the accompanying statement reveals a slightly more hawkish RBA – one that’s more willing to continue more aggressively in trampling down inflation.
There is now a clear indication that that the RBA will impose another rate hike when it meets on 7 February 2023.
"The Board expects to increase interest rates further over the period ahead," reads the statement - an explicit signal for more hikes in sight.
"The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that," adds Governor Philip Lowe in the statement.
The market now expects the RBA to lift the rate to 3.60% by March 2023 - with two 0.25% rate hikes in February and March.
Goldman Sachs have a more hawkish outlook which will see the RBA raise by 0.25% in February, March, April and May to 4.1% by mid 2023.
What the RBA changed in its December statement is highlighted here.
The full statement is available here.
