Key points
  • RBA governor Michele Bullock told a conference the central bank's board "will not hesitate" to hike the cash rate if deemed necessary
  • It comes as the nation learns inflation continued to moderate in the September quarter, coming in at 5.4% annually
  • The RBA board will on 7 November, with November being a historically popular month to alter the rate - 14% of the time since 1990.

The tough talk came ahead of the release of September quarter CPI, which came in at 5.4% annually.

“Our focus remains on bringing inflation back to target within a reasonable timeframe, while keeping employment growing,” Ms Bullock said on Tuesday night to the Commonwealth Bank markets conference in Sydney.

“It is possible that this can be done with the cash rate at its current level but there are risks that could see inflation return to target more slowly than currently forecast.”

The RBA instigated one of its fastest hiking sprees on record in May 2022 and has since put forward a further 11 increases, bringing the cash rate to 4.10%. 

Meanwhile, inflation has moderated.

The quarterly consumer price index (CPI) peaked in December 2022, having surged 7.8% over the 12 months prior. 

It has since moderated to below 6%, but the latest read came ahead of expectations.

The key release is one of “several pieces of information” the board will receive prior to its next meeting.

Economists at the big four banks expected inflation to have risen by between 5.1% and 5.3% over the year to the September quarter. 

While seemingly tracking lower, inflation is still notably higher than the RBA’s target of 2% to 3% annually, which the central bank previously said it expects to reach in 2025. 

Ms Bullock last week warned that “global shocks” like the Israel-Palestine conflict could undermine the RBA’s efforts to constrain inflation.

While the governor’s tough stance on price stability may worry burdened borrowers, Ms Bullock did note that cash rate hikes typically take time to impact consumer spending.

“At the same time, the board is mindful that growth in demand and the rate of inflation have been moderating, and that there are long lags in the transmission of monetary policy,” she said.

Will the RBA board hike interest rates in November?

The RBA board will next meet on 7 November.

No doubt the nation will stop twice that day: Once at 2.30pm AEDT to learn of the RBA board’s decision and a second time at 3.00pm AEDT as the starting gate opens at the Melbourne Cup. 

Historically, the RBA board has more often hiked at its November meeting than at that of any other month, arguably due to the quarterly CPI release and the upcoming holiday period.

Right now, NAB is the only big four bank forecasting the RBA board to hike the cash rate at the November meeting.

CommBank is nearly on the fence, ascribing a 40% chance of a hike next month. 

ANZ and Westpac hinged expectations on today's CPI release with an upward surprise more likely to trigger a cash rate hike.

As of the ASX’s Tuesday close, 79% of traders expect the cash rate to remain at 4.10% next month and 21% are calling a 25 basis point hike.

Image courtesy of the RBA.