The Reserve Bank of Australia (RBA) has rolled out another 25bps hike in November, pushing the cash rate to 2.85%.

This marks the seventh consecutive month of increases by the RBA since May.

The RBA’s latest decision is consistent with the prediction of some major bank economists.

Here are the highlights of RBA Governor Philip Lowe’s latest monetary policy statement.

On inflation:

  • Inflation remains “too high” in Australia — over the year to September, CPI inflation was 7.3%, the highest in more than three decades.
  • Further increase in inflation is expected over the months ahead, to peak at around 8% later this year.
  • Inflation is set to decline next year due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand.

On the economy:

  • Australian economy is growing solidly, with the national income being supported by a record level of the terms of trade.
  • Growth, however, is likely to moderate over the year ahead as the global economy slows down, and the growth in household consumption eases.
  • RBA’s central forecast for GDP has been revised to 3% this year and 1.5% in 2023 and 2024.

On the labour market:

  • The unemployment rate was steady at 3.5% in September.
  • Job vacancies and job ads are both at high levels.
  • The forecast is fore the unemployment rate to remain steady but to gradually increase to above 4% in 2024.

On uncertainties, impact of rate rises:

  • The deterioration of the global economy remains a source of uncertainty.
  • How household spending responds to tighter financial conditions will also be a key uncertainty.
  • The RBA recognises that monetary policy operates with a lag and that the full effect of the increase is yet to be felt in mortgage payments.
  • Higher interest rates and higher inflation are putting pressure on the budgets of many households.
  • Consumer confidence has also fallen, and housing prices have been declining following the earlier large increases.
  • Households have built up large financial buffers and savings rate remains higher than it was before the pandemic.

On future monetary policy decisions:

  • The RBA recognises that it has increased interest rates materially since May, which is necessary to establish a more sustainable balance of demand and supply in the Australian economy to help return inflation to the 2% to 3% target.
  • The size of timing of future rate increases will depend on incoming data and the assessment of the outlook for inflation and the labour market.
  • The RBA says it remains “resolute” in its determination to return inflation to target band.