Comments from Commonwealth Bank of Australia on the RBA minutes out earlier today:

CBA's note their key items in the minutes:

  • The RBA Minutes today indicate the Board debated the case to raise the cash rate by either 25bp or 50bp in November.
  • The Board settled on a 25bp increase as the cash rate had been increased materially in a short period of time and that there were lags in the operation of monetary policy.
  • The Minutes note that having slowed the pace of tightening down in October, “acting consistently would support confidence in the monetary policy framework among financial market participants and the community more broadly.”
  • The Minutes once again reiterate that the Board is not on a pre-set path and importantly note that, “the Board is prepared to keep rates unchanged for a period while it assesses the state of the economy and the inflation outlook.”

CBA add their forecast:

  • Our central scenario is for the RBA to raise the cash rate by 25bp at the December Board meeting. But given the RBA has flagged the idea of pausing in the tightening cycle a rate hike in December is not a done deal, particularly if the data over the next two days comes in softer than anticipated.
  • We expect the peak in the cash rate to be 3.10% (to be reached either next month in December or February 2023). The risk lies with a higher cash rate of 3.35%.
  • Financial markets have currently priced a peak in the cash rate of 3.85%, to be reached in Q3 23. We believe that if such pricing is realised the Australian economy will not have a soft landing and the unemployment rate will rise materially above the level consistent with full employment. Such an outcome is not what the RBA is trying to achieve.

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CBA have been on the dovish side of this RBA hiking cycle.

rba cycle cash rate 01 November 2022

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As an aside, this is something to watch that might crank inflation higher ahead:

Obviously there is basically nothing at all the Reserve Bank of Australia can do to address supply-chain issues such as this. However, the Bank could very well view that if it could do something to reduce demand in the face of supply constraints that'd go some way to addressing inflationary impacts. That would translate as further rate hikes, at the margin. Something to keep an eye on.