The RBA is set to lift the cash rate in February after strong retail sales and a revival in price growth dimmed hopes for an immediate pause.
A closely watched measure of core inflation grew to 5.6 per cent in November, from a year ago, up from 5.4 per cent in October.“It’s likely the RBA will still see inflation as ‘too high’, and hence hike again,” said George Tharenou, an economist at UBS. He forecasts a cash rate increase next month.
“Overall, the remaining tightness in the labour market and ongoing demand for workers plus lingering increases in general and core inflation mean the RBA will continue to critically assess the economic state of play in terms of the need for further tightening of monetary policy at their first board meeting of 2023,” said KPMG chief economist Brendan Rynne.
The dollar index, which measures the greenback against six major currencies, was steady at 103.325, not far from a seven-month low touched on Monday after slower-than-anticipated US wage growth prompted traders to bet on smaller Federal Reserve rate rises. Bond traders expect fewer interest rate increases than the Fed predicts. They project the policy rate to top 4.9 per cent this year, while policymakers anticipate a peak of 5.1 per cent.
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