We wrote a note this morning saying rates are a 50% chance of rising by 25 bpts compared to market expectations of an 80% chance. What we've seen today is the RBA sending a message that it's raising rates in a sensible way.
Inflation is not the only problem, there is also a growing sense that financial stability is important. Trimmed mean inflation is under 5% and if it continues to fall in coming months, we think it will be a 25 bpts journey back to 3% before a hold and pause early next year.
Bottom line: The RBA has done a lot of hard work and will now sit back and watch to see what the data suggests. Last week's Bank of England experience has sent shivers throughout the market and the RBA is perhaps the first global central bank to react with caution. A job well done.
Peter Esho Wealthi Co-Founder, a Forbes featured business leader, contributor to Money Magazine and regular guest on business TV channels including ABC News, BBC, Bloomberg and CNBC. Connect with Peter on LinkedIn.
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