🏦🇦🇺Cable FX Macro Weekly Note: RBA Cash Rate Decision

**As seen in Risk In The Week report 10/28/22, subscribe at cablefxm.co.uk/reports

Early October, the market had seen the RBA delivering another 50bps hike to the Cash Rate target, the central bank disappointed expectations as it moved by half that amount, the cost of money is now at 2.6%. The central bank cited strong domestic demand while it pointed that the move helped achieve its price stability goal and more sustainable balance between demand and supply in the Australian economy. The RBA also pointed at further rate hikes while it warned that tighter financial conditions pose a source of uncertainty to household spending. They noted that that higher inflation and interest rates are pressuring household balance sheets, while the full effects of the Cash Rate had not filtered into mortgages. We have recently seen the latest CPI figures for Australia, Q3 headline inflation printed at 7.3% Y/y, this was 1.2 percentage points higher than the prior quarter and marked the highest rate since 1990. The inflation surprise has led Westpac analysts to expect the RBA to move back to a 50bps pace, they’re concerned about the broadness in the inflation distribution as 90% of the expenditure items is now rising above 2.5% in the quarter. The desk at ANZ sees the RBA Cash Rate peaking at 3.85% by May of next year, the bank expects inflation to remain persistently high on the back of weather conditions, higher operating costs passed to consumers, and a weaker Australian dollar.