- Omicron variant is new source of uncertainty
- Household consumption is rebounding strongly
- The outlook for business investment has improved
- Economy expected to return to pre-Delta path in H1 2022
- Leading indicators point to a strong recovery in labour market
- A further pickup in wage growth is expected
- Repeats will not increase the cash rate until actual inflation is sustainably within 2-3% target range
- Inflation to reach 2.5% over 2023
- Housing prices have increased strongly but the rate of increase has eased
- At Feb meeting, the RBA will consider the bond purchase program
As entirely expected, the Reserve Bank of Australia held the cash rate at 0.10% as it continues the streak that started after cutting rates to the rock bottom level at the start of the pandemic.
Markets are pricing in a hike as soon as July but economists are calling for a hike in Q1 2023.
At the November 2 meeting, the RBA discontinued the target of 10 bps for the April 2024 Australian government bond. That sparked turmoil in the domestic and global bond market.
That move was part of a larger hawkish shift for most global central banks but since then the omicron variant has upended assumptions and put global markets on edge.
The statement takes an upbeat tone despite the omicron variant but it does continue to forecast inflation hitting its target in 2023, which would preclude a hike until then, though that forecast was de-emphasized.
The announcement to consider QE in mid-February isn't a surprise. They previously had said buying would continue at least until mid-February. This is a not-so-subtle nod that it will end, though that's already priced in by markets.
