On November 23 the Reserve Bank met expectations by taking its official cash rate up 0.75% to sit at 4.25%. They also lifted their projection for where the rate will peak from 4.1% to 5.5% which was slightly higher than market expectations which immediately ahead of the rate review were at 5.1%.
The key message from the monetary policy review however came not from the interest rate numbers but the words used by the central bank. They warned about the need to put the economy into recession in order to get inflation under control and how a range of factors were combining to create greater than expected inflation risks.
Specifically, they noted that in spite of falling house prices, rising interest rates, and high consumer pessimism, householders continue to spend. They also noted the stronger than expected rebound in foreign visitor numbers, and the better than expected net migration inflows.