RBA hikes the Cash Rate Target by 25bps to 4.85%, as expected, through 6-3 vote, while it sees materially higher inflation and noted inflation risks are still to the upside

RBA hikes the Cash Rate Target by 25bps to 4.85%, as expected, through 6-3 vote, while it sees materially higher inflation and noted inflation risks are still to the upside.

A fully expected 25bp hike that still carries hawkish signal through two channels: the split vote and the inflation language. A divided decision is itself the tell, since central banks that deliver consensus-expected moves on narrow votes have historically been closer to the end of a tightening run than the headline suggests, with the dissent direction indicating where the centre of gravity is shifting. The pairing of a materially higher inflation forecast with an explicit statement that risks remain to the upside is the standard template for keeping the door open to a follow-on move, and in past episodes of this kind the front of the curve has repriced on the language rather than the delivered hike. The transmission runs through short-end yields and the currency, with the two-to-three year sector the most sensitive to whether the upgraded forecast implies one more hike or an extended hold. What distinguishes this from a hawkish surprise is the 'as expected' delivery: the precedent for in-line moves with hawkish guidance is a muted initial reaction that firms or fades as subsequent inflation prints arrive. The follow-ons are the accompanying statement detail and any forward guidance on the conditions for the next move, plus the next quarterly inflation reading, which now carries elevated weight given the bank has tied its stance to upside risks.