RBA Minutes: Board considered a 25 basis point hike or keep unchanged and reconsider at a later meeting

The Reserve Bank of Australia (RBA) has released the minutes of its June monetary policy meeting, stating that “the board considered raising rates by 25 basis points or keeping them stable and reconsidering at a later meeting“.

Additional comments

The arguments were “finely balanced”, but the Council decided that the immediate increase had more force.

The rise in interest rates would provide greater confidence that inflation would return to the target within a “reasonable” period.

The balance of risks for inflation had been tilted to the upside since the May meeting.

The longer inflation remains above target, the greater the risk of rising inflation expectations.

Service sector price inflation has yet to abatethe disinflation of goods is lower than in other countries.

The Expected increases in electricity prices and high rents added to inflation risks.

There is a risk that wages and prices will be implicitly indexed to past high inflation.

Productivity is disappointing and needs to pick up to offset wage increases.

The increase in wages for fair work was higher than expectedand public wages also increased.

If the rebound in house prices continues, consumption will be less affected than expected.

There are signs that consumer spending will slow further in the second quarter.and some households are under significant financial pressure.

Policy delays implied the risk that earlier tightening could trigger a deeper economic slowdown.

The fall in the prices of raw materials and shipping could reduce inflationary pressure.

The advice will keep a close eye on household spending and financial stress.

The Council reaffirmed its willingness to do the necessary to bring inflation to the target.