The latest meeting minutes have disclosed that the RBA, for the first time since embarking on its aggressive series of rate hikes, did not entertain the possibility of further increases.
The latest minutes from the Reserve Bank’s March 18-19 board meeting have unveiled that the board opted not to deliberate on the possibility of raising interest rates further, choosing instead to maintain the cash rate at 4.35 per cent. Since initiating its sequence of 13 rate hikes in May 2022, the RBA had previously entertained the idea of raising rates at every meeting, making March’s meeting the first instance where this option was disregarded.
Despite this shift, board members acknowledged that the risks to the economic outlook had become “a little more even,” and stated that “it was appropriate to characterize the policy outlook as one in which it was difficult to either rule in or out future changes in the cash rate target,” according to the minutes.
Source: Reserve Bank of Australia
The prevailing sentiment among most economists and investors is that the RBA’s next move will be a rate cut, with money markets fully anticipating a 25 basis point easing in the cash rate at the RBA’s September 23-24 board meeting.
The meeting minutes noted that inflation had continued to moderate over recent months, largely in line with expectations. However, the minutes also highlighted that services inflation remained elevated, and the recent slowdown in monthly inflation was influenced by temporary factors. Currently, inflation stands at 3.4 percent based on the RBA’s latest measure, with the RBA projecting it to fall within the target band of 2 to 3 percent by December 2025.
While bringing inflation back to target remained the board’s top priority, members acknowledged that it would take some time before they could have sufficient confidence that this would occur within a reasonable timeframe.
In response to the minutes, Treasurer Jim Chalmers hailed them as a “positive development” for homeowners.
“By the time of the Reserve Bank’s next meeting, it will have been six months since the last interest rate increase in our economy,” Dr. Chalmers remarked.
“This period of stability will provide Australian homeowners and mortgage holders with some relief.”
The RBA board is scheduled to convene on May 6-7, with expectations leaning towards maintaining the current interest rates.
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