Australia: RBA surprised every with a 25 bps hike – UOB

Economist Lee Sue Ann at UOB Group reviews the last RBA gathering, where the central bank lifted the OCR to 3.85% (from 3.60%).

Key Takeaways

“The Reserve Bank of Australia (RBA) decided to increase the cash rate target by 25bps to 3.85%. Today’s decision, which follows the RBA’s decision to hold its benchmark policy rate steady at 3.60% in the Apr meeting; came as a surprise, and against consensus as well as our forecast for policy to remain unchanged.”

“The RBA said that some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe. In justifying today’s increase, the RBA added that although inflation in Australia has passed its peak, at 7 per cent, it is still too high and will be some time yet before it is back in the target range.”

“Nonetheless, we think this is the last hike of this cycle... The RBA will also be releasing its quarterly Statement on Monetary Policy Statement (SoMP), due for release this Fri (5 May).”