Fitch Ratings with projections for Reserve Bank of Australia monetary policy.
In summary:
- The RBA has indicated it will not raise the cash rate until inflation is sustainably within its 2%-3% target range, a condition that it previously did not expect to be met before 2024 under its central scenario. However, its guidance was softened in its 2 November 2021 monetary policy statement, which hinted that faster-than-expected progress towards meeting the inflation target could lead to a case for raising the rate before 2024.
- We believe the next step will be the termination of government bond purchases, probably in late 1Q22 or during 2Q22; bond purchases were reduced to AUD4 billion weekly, from AUD5 billion, in September 2021. We continue to expect the cash rate to be raised in 2023, although there is a possibility that it could even be raised in late 2022 if inflation and wage growth exceed our assumptions.