Sluggish retail data could keep rate hike cycle at bay

Jacob Shteyman | September 28, 2023

The Reserve Bank will cast a keen eye on economic data before its looming next interest rate decision, with the first reported rise in inflation in four months stoking fears of a return to hikes.

Retail trade and job vacancy figures to be released by the Australian Bureau of Statistics on Thursday will provide further insight into how sticky inflation remains to the Australian economy.

Wednesday’s monthly consumer price index came in at an annual rate of 5.2 per cent, up from 4.9 per cent in July.

But analysts largely believe the pick-up is no cause for concern, with the figure broadly in line with expectations.

Inflation for August was fuelled by a big 9.1 per cent jump in petrol prices.

The ABS pointed out inflation was actually moderating when volatile items – fruit, vegetables, fuel and holiday travel – were stripped out, sinking to 5.6 per cent from 5.8 per cent in July.

EY senior economist Paula Gadsby said RBA governor Michele Bullock was likely to look past the stronger fuel prices and keep rates on hold at her first board meeting on Tuesday.

“The risk of another rate hike remains, but our core expectation is that the Reserve Bank will sit tight,” she said.

NAB observed a slowdown in online retail sales for August, down 1.9 per cent relative to the previous 12 months.

If the figures are replicated for the broader retail sector, it could signal the RBA’s rate rises have had their intended effect and reinforce the argument the bank’s job is done.