The key points are:
The RBA hiked its cash rate by 0.25% to 3.85% as widely expected in response to inflation running above target.
Its commentary was cautious and hawkish with inflation now expected to stay above target for longer even with assumptions for two more rate hikes and the stronger $A.
We thought it was a close call and leaned to a hold. But having hiked we expect the RBA to hold for the remainder of the year as we see underlying inflation as having peaked in the September quarter and falling back to target.
Valid concerns about capacity constraints though are likely to keep the risk of a further rate hike high.
The best thing government can do to help alleviate this is to lower the level of public spending.