Economist at UOB Group Lee Sue Ann reviews the latest interest rate decision by the RBA (October 4).

Key Takeaways

“The Reserve Bank of Australia (RBA) decided to increase the official cash rate (ORC) by 25bps to 2.60%. It also increased the interest rate on Exchange Settlement balances by 25bps to 2.50%. While most had expected for a 50bps hike, the increase was in line with our forecast.”

“It was previously indicated that the Board will debate the merits of hiking by a quarter-percentage point or a half-point at this Oct meeting. Nonetheless, the RBA continued to signal more increases ahead, with developments in the global economy, household spending and wage-price conditions driving the size and timing.”

“Our call on the OCR is unchanged – we have penciled in 25bps hikes for the remaining two meetings in 2022. That will take the OCR to 3.10% by year-end. We then look for a pause thereafter. The next RBA meeting is on 1 Nov. Before that, focus will be on key employment data for Sep and 3Q22 CPI data, due on 20 Oct and 26 Oct, respectively.”