Markets and analysts were in wide agreement there would be no move in the cash rate on Melbourne Cup Day, the RBA board’s second last meeting for the year.
Half an hour before the big race, the RBA issued its ‘nothing to see here’ verdict with governor Michele Bullock maintaining her cautious approach in her post-meeting media conference.
Markets have also effectively ruled out a December rate cut in the wake of last week’s September quarter CPI inflation data that showed underlying inflation remains outside the RBA’s much-touted target band.
Ms Bullock again repeated the RBA will not consider cutting the cash rate until inflation is sustainably within its target range of 2-3%.
In a statement published with today's decision, the RBA said it did not see inflation returning sustainably to the midpoint of its target until 2026.
Annual headline inflation for the September quarter came in at 2.8%, marking the first time inflation was within the central bank's target range for three years.
This was largely attributed to federal and state government energy rebates which effectively saw electricity prices drop 17.3% over the quarter.
Underlying inflation remains sticky
But the RBA is more concerned with trimmed mean inflation which removes one-off or temporary pricing changes to more accurately measure underlying inflation.
That figure came in at 3.5%, a drop on 3.9% recorded in the previous quarter, but still outside the RBA’s target zone.
In its statement, the RBA said underlying inflation "remains too high" and "it will be some time yet before inflation is sustainably in the target range".
Although the underlying inflation rate is slowing, Ms Bullock said services inflation, at around 5%, is still rising too quickly for the RBA to consider cutting the cash rate.
The services inflation measure includes prices for insurances, health, education, and rents.
In her media conference, Ms Bullock again refused to be drawn on a timeframe for when a rate cut might be imminent, saying it depended on "many factors".
"I'm not going to be drawn into another forward guidance," she said. "What I would say I think at the moment, we've got the right settings. Monetary policy is restrictive and that's showing.
"We will assess the information as it comes through ... and we will try to make sure that we're tuned in enough that if things start to turn down more than expected that we're ready to act, but we don't know."
What else does the RBA consider?
As well as CPI inflation, the RBA board said it also considered a raft of other key economic data in its cash rate deliberations and these paint a more nuanced picture.
Ms Bullock said ultimately aggregate demand in the economy still remains above its supply capacity while the labour market remains tight.
She also addressed government spending as a driver of demand, particularly leading into a federal election.
“I think that the government is well aware that inflation is the big thing here, and that cost of living is what’s hurting people,” she said.
“My reading when I speak privately to the treasurer … is that he’s fully aware of the inflationary implications of his own policies.”
The RBA’s final board meeting for the year is scheduled for 9-10 December.
The big bank economists are not expecting any cut to the cash rate until February 2025 although given Ms Bullock's latest assessment of the economy, perhaps that may be a little premature.
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