Reserve Bank of Australia monetary policy decision for July 2022. Governor Lowe is making it very clear that there are more hikes yet to come. Which we knew.

Headlines via Reuters:

  • Board expects to take further steps in the process of normalising monetary conditions
  • Inflation in Australia is also high, but not as high as it is in many other countries
  • Board is committed to doing what is necessary to ensure that inflation returns to target over time
  • Size and timing of future interest rate increases will be guided by data and assessment of the outlook for inflation and the labour market
  • Strong demand, a tight labour market and capacity constraints in some sectors are contributing to the upward pressure on prices.
  • Inflation is forecast to peak later this year and then decline back towards the 2–3 per cent range next year
  • One source of ongoing uncertainty about the economic outlook is the behaviour of household spending
  • Medium-term inflation expectations remain well anchored and it is important that this remains the case.
  • Recent spending data have been positive, although household budgets are under pressure from higher prices and higher interest rates
  • Australian economy remains resilient and the labour market is tighter than it has been for some time.
  • Bank's business liaison program and business surveys continue to point to a lift in wages growth

Full text is here:

A hawkish statement was expected, and its not dovish. But, being a bit nuanced its not as hawkish as perhaps was expected. Lowe is playing it straight with his data-dependent comment and also on how forecasts evolve. For now he is indicating it is still the RBA's assessment that inflation will fall back into the target band in 2023.

IMO its too early to forecast what the RBA will at its next meeting, August 2. But, I will anyway. Another +50bps would seem to be a no brainer.

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AUD/USD has dropped a few tics. Sell the fact after the rise overnight.

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Reserve Bank of Australia Governor Lowe:

RBA Lowe