While the bank ultimately left its official cash rate target unchanged at 4.35%, the minutes of the RBA’s February meeting showed that some members had raised the case for a hike of 25 basis points.
The RBA had struck an unexpectedly hawkish tone during the meeting, warning that interest rates could still rise further if inflation remained stickier than expected in the near-term.
This notion was a key driver of considerations for another rate hike, although the bank chose to hold on what it perceived as easing risks over inflation not returning to its 2%-3% annual target range within a “reasonable timeframe.”
Recent data showed that Australian consumer price index inflation had eased substantially by end-2023. But it still remained well above the RBA’s target.
The RBA expects inflation to only reach its target range by mid-to-late 2025, and that inflation will reach the midpoint of the target range only by 2026.
The central bank also expects further cooling in the economy and an uptick in unemployment.
Still, the minutes of the RBA meeting showed that the bank was also on guard to reduce interest rates if the Australian economy were to weaken more than initially expected.
“Increasing the cash rate target now would not prevent the Board from easing monetary policy if the economy were to weaken more sharply than envisaged,” the RBA minutes said.
The bank noted continued uncertainty over the Australian economy in the coming months, especially as global economic conditions worsened and the path of inflation remained uncertain.
The Australian dollar fell 0.2% after the release of the minutes.
Source: Economy - investing.com
