The Reserve Bank of Australia (RBA) published the Minutes of its November monetary policy meeting on Tuesday, highlighting that judged case for hiking was the stronger one given inflation risks had increased. Additional details of the RBA Minutes suggest that the central bank saw the risk that inflation expectations could increase if rates were not raised.
“Considered case for raising rates or holding steady.”
“Board saw “credible case” that a rate rise was not needed at this meeting.”
“But judged case for hiking was the stronger one given inflation risks had increased.”
“Whether further tightening required would depend on data, assessment of risks.”
“Saw risk that inflation expectations could increase if rates were not raised.”
“Important to prevent even a modest further increase in inflation expectations.”
“Growing mindset among businesses that cost increases could be passed on to customers.”
“Noted staff forecasts for inflation at meeting assumed one or two more rate rises.”
“Board noted cash rate remained below that in many other countries.”
“Rising house prices could indicate policy was not especially restrictive.”
“Surge in domestic population growth made it harder to judge resilience of economy.”
“Inflation and economy were slowing, geopolitical and global outlook uncertain.”
“An escalation in tensions in the middle east could be a drag on global growth.”
At the time of writing, the AUD/USD pair is trading near 0.6568, holding higher while adding 0.11% on the day.
The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.