Worried about resurgence of inflation, RBA resumes discussion on raising interest rates

The Reserve Bank of Australia resumed discussion of a rate hike at its May policy meeting, before deciding to stay on hold as it aimed to avoid \”excessive fine-tuning\”.

The Reserve Bank of Australia resumed discussion of a rate hike at its May policy meeting and then decided to stay on hold as it aimed to avoid \”excessive fine-tuning\”.
The minutes of the May 6-7 meeting released by the Reserve Bank of Australia showed that the Monetary Policy Committee discussed two options when keeping the key interest rate unchanged at 4.35%. It pointed out that although the economic data before the meeting were stronger than expected, risks surrounding the economic forecast remained. \”balance\”.
Commonwealth Bank of Australia economist Belinda Allen said the board \”appears to be focused on reviewing \’short-term changes in inflation to avoid over-tweaking\’.\” expected\”.
The minutes reinforced the widely held view that interest rates will remain elevated for longer A continued fall in Australian government bonds led to a third consecutive day of gains for the policy-sensitive 3-year yield.
Traders now believe the RBA will remain on hold until mid-2025.
The central bank raised its near-term inflation forecast, expecting consumer prices to recover from 3.6% in the first three months of this year to a target of 2-3% by the end of 2025.
The latest forecast is based on the technical assumption that interest rates will remain unchanged until mid-2025.
The minutes showed members agreed it was important to convey that recent data and other information suggested rising inflation risks.
\”It is difficult to confirm or rule out future changes to the cash rate target.
\”The minutes showed that the rate-setting committee has limited tolerance for inflation returning to target levels after 2026.\”
ANZ analyst Adam Boyton believes this means boards may be prepared to tolerate slightly higher inflation for longer than expected.
Boyton noted that the central bank is still expected to eventually cut interest rates because the economy is weak enough to achieve target inflation.
He expects the Reserve Bank of Australia to start mild easing from November and cut interest rates a total of three times.
Governor Michele Bullock has previously said the RBA does not need to wait for inflation to enter range before cutting interest rates.
Even so, she has repeatedly dismissed speculation about near-term easing, which reflects the RBA\’s forecast that inflation will not return to target until the end of next year.

Like (0)
Previous May 21, 2024 9:27 am
Next May 21, 2024 9:27 am

Related posts