The RBA is set to meet tonight (or tomorrow, depending on where you’re located in the world), and raise rates by another 25bps to 3.60%. The latest survey of economists shows that almost all agree with the hike. One economist out of 27 who were surveyed did not expect the RBA’s increase to be 15bps.
This move is a continuation of last year’s. The expectation was growing that the RBA would pause, if not stop raising interest rates. It was believed that liquidity tightness was too dangerous and inflation would be under control. The Q4 CPI figures showed that inflation was well above expectations. This changed everything for the RBA.
It’s about the expectations
Australia only publishes official CPI figures every quarter. This makes fine-tuning policies in response to inflation more difficult. The RBA must assume higher inflation since there has not been any new official CPI information released since the last quarter. This would put the needle in the hiking camp with the expectation Lowe will communicate any further increases in the…