RBA sits pat, cash rate unchanged at 4.35% and no cuts until early 2025

• Stocks saw little movement following the announcement 

• Bonds were muted on the statement, but rallied following the press conference 

• The statement from the RBA remains broadly hawkish, with a focus on core inflation and ignoring false dawns 

• The next meeting in scheduled for November, but it is not expected to be a ‘live’ meeting

The September 2024 RBA Monetary Policy meeting was held yesterday. The board elected to leave policy settings unchanged, which was universally expected. It was a dead rubber meeting, with most attention on the statement and any signs the board has softened its hawkish stance. Yes and no, but on balance still comfortably on the hawkish side of the spectrum. During the post meeting press-conference, Governor Bullock said rate hikes and cuts were not explicitly discussed, rather the structure of the meeting was around what had changed since August.

The core message taken from the statement was "while headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high." This focus on core inflation is a strong message from the board, don’t get sucked in by temporary dips in inflation because of electricity rebates and rent assistance. They’re looking through the near-term noise.

The statement also focused more on uncertainties and potential downside than prior meetings, and the “all options are on the table” line has been replaced with “will do what is necessary,” which is arguably less hawkish. Since the last meeting, jobs data has held steady, with over +100K jobs added and a relatively consistent 4.2% unemployment rate, which is tight by historical averages. Wages remain a modest inflationary headwind, but have past their peak. Productivity improvements remain elusive, and back at 2016 levels. GDP printed at its weakest – excluding the covid period – since 1992, growing a very modest +1.0% over the year, better than expected, but still weak.

Going forward….“The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”

Following the post meeting press conference, bond yields plunged 6 – 10 bps and pricing for a December rate cut firmed up. We don’t expect any rate cuts until February next year at the earliest.