Insights

The statement was almost a carbon-copy of the September statement, with little difference to report. Hardly surprising given there’s been nothing of significance in the data to force their hand. We would also note the backdrop (or distractions) of Melbourne Cup and the eve of a US election.

Subtle call outs were made in the following areas:

• Underlying versus headline inflation - this was needed given recent falls in headline inflation (as expected) versus underlying inflation (3.5%) which remains firmly above the mid-point (2.5%) of the RBA’s target band. The RBA sets their policy based on underlying inflation.
• Further detail on labour market conditions as they pertain to full employment and implications for inflation - i.e. even though the unemployment rate has ticked up, labour market conditions remain tight with a very high participation rate, and with both underemployment and youth unemployment improving of late.
• Recent Chinese stimulus - which was large, but short on some specific details.

The board maintained that monetary policy would need to remain restrictive (i.e. maintaining higher rates) for some time in order to meet their objectives, reiterating they don’t expect underlying inflation to fall into the mid-point of their target range until 2026.

Leading into the meeting, market pricing had been pushing out the first rate cut until Q1 2025, with some commentators now suggesting Q2 2025 is more likely given recent data.

Following the announcement, Australian equities, the AUD/USD, and Australian bond yields were largely unmoved. We think investors were too pre-occupied.

As always, if you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser