The August statement was read by some to be a little on the dovish side (ie. less aggressive), which at the time led to market’s pricing in potentially smaller rate hike increments ahead. But that hope was largely unfounded given inflation continues to rise with the backdrop of tight labour market conditions.

We read the August statement as less aggressive, but not enough to get the RBA to back down to smaller rate hike increments just yet, instead more of an acknowledgement that they’ve pushed through a lot of rate rises in a short period of time and are likely to squeeze through as many rate rises as they can before the year’s out (ie. a small window).

The September statement was a neutral one but was packed full of constant reminders of the RBA’s commitment to bringing inflation under control so that their inflation fighting credibility is maintained. They again reiterated that the path to bring inflation under control is a narrow one, with expectations that inflation will peak at the end of the year but will not fall to within their 2-3% band until 2024.

Emphasis was placed on their close monitoring of labour costs and the price setting behaviour of firms in the period ahead, along with consumption patterns at the household level given savings levels remain high whilst costs of living continue to rise.

The statement made clear that they expect to raise rates again in the period ahead, but the Board felt it necessary to again clarify that they were not on a pre-set path with regard to policy normalisation.

Given current and forecast data, and the September statement, we think there’s likely another 0.50% rise on the table at their next meeting in October, barring any significant change to data. Markets seem to be implying that RBA ends this cycle at a cash rate of around 3.50%. Our expectations are closer to 3%.