SCM Jeans
Minutes of the Reserve Bank of Australia’s June policy meeting minutes revealed that policymakers stressed the need to remain vigilant about upside risks to inflation, adding that a material rise in prices could require significantly higher rates. The board is ready to raise rates if “inflation expectations” change.
Members noted that the staff would incorporate an assessment of the impact of the budgets on the outlook for output and inflation in the August forecasting round.
Members acknowledged that if inflation expectations were to rise materially from current levels, it could require significantly higher interest rates to bring inflation back to target, with adverse implications for growth in output and employment.
“Members of the RBA board also affirmed their assessment that it was still possible to achieve the board’s strategy of returning inflation to target in a reasonable timeframe without moving away significantly from full employment, even though this ‘narrow path’ was becoming narrower,” the minutes showed.
“The extent of uncertainty at present meant it was difficult either to rule in or rule out future changes in the cash rate target.”
The cash rate was held steady at the meeting due to the economy’s consistent path towards returning inflation to target in 2026, while preserving as many of the gains in employment as possible.
The board intended it will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labor market.
The RBA again mentioned that bringing inflation to target remains the board’s highest priority, and it will do what is necessary to achieve that outcome.
The S&P/ASX 200 Index fell 0.2% to around 7,734.9 on Tuesday, extending losses from the previous session.
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