• There was not enough concrete and meaningful economic data released to suggest a rate hike is necessary.
  • There might not be much to infer from recent "noisy" inflation, retail, and spending figures.
  • The RBA has taken on a softer approach than expected this month.
  • Experts say one more rate hike could still be on the cards in February - by that point the RBA would have had time to stop and look around. 

Inflation came to 4.9% in the 12 months to October, but the monthly indicator does not take into account a lot of services, which are what's driving inflation now.

The lower monthly spending and retail figures also show a marked slowdown, but the ABS has pointed to consumers "pressing pause" ahead of Black Friday, which posted a bumper $9 billion turnover in a lucrative weekend for retailers.

Non-discretionary spending posted a 7% growth rate in the 12 months to October, which is ahead of inflation and immigration percentage growth, though discretionary spending was down around 2%.

RBA governor Michele Bullock said the pause would allow the board more time to assess the inflation outlook ahead of the the next meeting in February.

By then inflation for the December quarter will have been released (31 January). 

"The impact of the more recent rate rises, including last month's, will continue to flow through the economy," Ms Bullock said.

"[This decision] will allow time to assess the impact of the increases in interest rates on demand, inflation and the labour market."

NAB's head of market economics Tapas Strickland seemed miffed at the decision, saying the RBA overall has developed a "watered-down tightening bias" and that this month's meeting was a "non-event".

"Indeed 160 out of 703 words in the post-Meeting Statement were used to discuss the rate decision in November, which reads as if the Board did not earnestly discuss an option to hike," Mr Strickland said.

Barclays economists said the rhetoric presented this month was less hawkish than expected.

"The bank's 'month-by-month' policy of looking at the data meant little likelihood of a hike today," they said.

"We expect the next move to be a cut in quarter-four 2024."

For Judo Bank chief economic adviser Warren Hogan, the key concern remains the labour market.

"It keeps demand in the economy and puts upward pressure on wages. As I said, too early to call the cycle as over although we are getting close," Mr Hogan wrote on X.

The RBA's forecasts for unemployment and inflation returning to target on-time suggest one more rate hike is needed.

"Any upside surprises will be met with further policy action. For this reason, the February meeting should still be considered ‘live’," said Luci Ellis, Westpac chief economist and former 30-year veteran of the RBA.

"It remains our view, though, that it is more likely than not that the RBA has reached the peak of its rate hiking cycle."

AMP chief economist Dr Shane Oliver said there remains upside inflation risks and thus potential more rate hikes at the expense of economic growth.

"We are allowing for a 40% risk of another hike which would most likely come in February if it occurs," Dr Oliver said.

"Yet continuing to raise interest rates will only add to the already very high risk of recession, particularly given the uncertainty around the long and variable lags with which rate hikes impact the economy meaning that there is a big impact yet to fully show up."

GDP growth for the September quarter, to be released by the ABS on Wednesday, is forecast to be 0.4% greater over the quarter and 1.8% on the year; Australia is expected to still be in a per-capita recession.

Image by Sebastian Herrmann on Unsplash