During today’s Asian session, the minutes of the last meeting of the Reserve Bank of Australiain which it is stated that further rate hikes are likely in the coming months.
Reuters has reported that “Australia’s central bank, frightened by the risk that fighting inflation could prove more difficult than previously thought, abandoned any idea of pausing its February policy meeting, signaling that more rate hikes would be needed in the coming months“.
The minutes of the February 7 monetary policy meeting, published today Tuesday, show that the Council of the Reserve Bank of Australia (RBA) only discussed two options: a 50 basis point hike or a 25 basis point hike“.
The Council opted for a rise of a quarter of a point, which placed the spot interest rate at 3.35%, the highest level of the decadetaking into account the uncertainty of the global outlook, the flexibility available to you through monthly meetings and the substantial increase in rates to date.”
Key comments
The advice considered a 25bp or 50bp rise, a pause was not an option.
There are arguments in favor of both options, but the Board agrees that the 25 basis point option is more robust.
Households facing tighter budgets and falling real incomes advocated 25 basis points.
Monthly meetings allow for frequent adjustmentsrates have already gone up substantially.
The upward surprises in inflation and wages call for a rise of 50 basis points.
The longer inflation remained high, the greater the risk of a price-wage spiral.
The Council agreed that further rate hikes would likely be necessary in the coming months.
The Board took note of the inflation forecasts based on the technical assumption of a 3.75% cash rate.
The Board noted that the cash rate was still lower than many other developed countries.
The Board will do what is necessary to return inflation to its target.
Australia benefits from strong terms of trade and large household savings reserves.
Australia will benefit more from China’s reopening than other countries.
About the RBA minutes
The Reserve Bank of Australia (RBA) publishes the Minutes of its monetary policy meeting two weeks after the interest rate decision is announced. Provides a detailed record of discussions held among RBA board members about monetary policy and economic conditions that influenced their decision to adjust interest rates and/or purchase bonds, which had an impact significant in the AUD. The minutes also reveal considerations on international economic developments and the value of the exchange rate.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
