RBA Cash Rate Decision for November 2022 – Balancing Inflation versus House Prices and the possibility of a Recession

The Reserve Bank of Australia yesterday increased their cash rate target to 2.85%, up 0.25% from 2.60%. Inflation is a long way above the RBA’s target to keep annual consumer price inflation between 2 and 3 per cent, on average, over time. 

The RBA is also expecting Inflation to remain high with the comment from the RBA Governor’s Statement yesterday saying “A further increase in inflation is expected over the months ahead, with inflation now forecast to peak at around 8 per cent later this year.” Again, yesterday’s Statement pointed to the difficult task faced by the RBA from external factors with the comment “One source of uncertainty is the outlook for the global economy, which has deteriorated over recent months.”

We watch the domestic and international influences with anticipation, especially the Federal Reserve Meeting this month and also the Australian Wage Price Index data which is published on November 16. 

Murray Nicol, financial planner with BKM Wealth states “Whatever these influences, we expect the RBA has now moved from fast pace increases to the slow-road of hiking rates in a measured way. Buckle-up – it’s going to be an interesting ride”