Analysts at TD Securities noted that the Reserve Bank of Australia hiked its policy rate by 25 basis points as expected but refrained from signalling a pause in rate increases as anticipated by some forecasts.
RBA views the risks to the upside
"Today's statement offered no suggestion the Bank was considering a pause just yet. It reiterated its forward guidance as it has since the October meeting that "The Board expects to increase interest rates further over the period ahead…."."
"The RBA's decision to retain this segment of its forward guidance was the right course of action. Pre-empting the Q4'22 inflation print and signalling a potential pause in today's Statement would not have stacked up as prudent 'risk management' in our view."
"In today's Statement the Bank removed reference to its Central CPI forecast for 2023. It also removed reference to its central unemployment rate forecast over coming months. In contrast, it reiterated its GDP forecasts for 2023 and 2024."
"The way we are reading these omissions is that a clear source of uncertainty for the RBA comes from the strong labour market and the upside risk to inflation it poses to its 2023 forecasts. For sometime the RBA has telegraphed that Australian wages growth "….remains lower than in many other advanced economies". However this was absent from today's Statement and suggests the RBA views the risks to the upside."
