The RBA’s unexpected call to slow interest rate hikes will be unpacked in minutes

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The direction of interest rates will be guided by employment and inflation figures following the sharp slowdown in policy tightening this month.

The logic behind the Reserve Bank of Australia’s surprise decision to revert to 25 basis point hikes, instead of the 50 basis point hike expected by the markets, will be revealed in the minutes of the board’s decision. of directors in October.

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The central bank eased off the accelerator in October after four straight 0.5 percentage point hikes pushed up the cost of mortgage repayments for homeowners.

JP Morgan economists expect the minutes to reflect the bank’s data-driven approach to monetary decision-making when released on Tuesday.

Minutes from the RBA’s October meeting should shed some light on its surprise hike in lower rates. Credit: AAP

October jobs figures and September quarter inflation are the main data releases ahead of the November decision, with unemployment figures due on Thursday and the quarterly Consumer Price Index due out on Thursday. next week.

Westpac economists have warned that October’s surprise move to 25 basis points could have unintended consequences.

The concern is that the RBA’s decision may have boosted confidence and delayed the slowdown in demand, keeping inflation higher for longer.

Westpac chief economist Bill Evans said a turnaround in the bank’s monthly confidence survey for the month suggested consumers were indeed feeling more confident following the RBA’s decision.

The Australian dollar’s collapse against the US dollar following the announcement could also fuel inflation, Mr Evans said.

RBA raises cash rate

The decision also made a return to 50 basis points more dangerous.

“Just as we have seen an overreaction in confidence following a positive shock, the impact of a larger than expected tightening is likely to be too damaging from an RBA perspective,” he said.

That’s why the bank’s economists expect the tightening cycle to continue for another month, but stick to 3.6% at the end of the tightening cycle.

RBA Deputy Governor Michele Bullock is also due to deliver a speech at the Australian Finance Industry Association conference in Sydney.

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