Westpac

The RBA Monetary Policy Board decided to raise the cash rate by 25bps to 3.85% this week, in line with economist and market expectations. Justifying the decision, the Board stated that inflation had "picked up materially" against a backdrop of "greater momentum in demand".

The unemployment rate ticked up to 5.4% in the December quarter. The details were positive though, with growth in jobs and hours being outstripped by an even larger rise in participation.

Key insights from the week that was. In Australia, all eyes were on the Q4 CPI print ahead of next week's RBA decision.

The new Complete Monthly CPI printed softer than we thought presenting downside risk to our December quarter estimates.

Australia's key release for the week was the Westpac-MI Consumer Sentiment Index which, after November's 'net positive' read, fell 9% to 94.5 in December – a 'cautiously pessimistic' level.

The RBA's decision to leave the cash rate unchanged came as no surprise to the market, but the focus was always going to be on the RBA's take on the recent dataflow.

The RBA kept the cash rate on hold as expected. The Board was slightly more hawkish but Governor Bullock was firmly focused on the upside risks to inflation.

In Australia, Q3 GDP fell short of expectations, rising just 0.4% (2.1%yr). However, much of the disappointment was tied to a run-down of inventories, masking a much stronger showing for domestic demand, up 1.2% (2.6%yr).

The September quarter National Accounts show growth slowed to 0.4%qtr – this was softer than both the 0.8%qtr expected by Westpac Economics and the 0.7%qtr expected by the market.