RBA minutes reveal hawkish tilt, another hike in Nov?

Minutes of RBA’s October meeting surprised market participants with a more hawkish tone than anticipated. The board seriously contemplated a rate hike at the meeting, but opted to hold due to a lack of “sufficient new information.

Additionally, the central bank underscored its “low tolerance” for a delayed return of inflation to target. It suggested that “some further tightening” might be imminent if inflation proves to be more persistent than current expectations.

As RBA steers ahead, its forthcoming November meeting is expected to be crucial. The board will be equipped with additional economic data on factors such as inflation, labour market dynamics, and overall economic activity. Additionally, they will have at their disposal revised staff forecasts

The minutes highlighted, “members considered two options for monetary policy at this meeting: raising the cash rate target by a further 25 basis points; or holding the cash rate target steady.” However, the decision to maintain the status quo was reached as “members agreed that the case to leave the cash rate target unchanged at this meeting was the stronger one.” This consensus was influenced by the absence of “sufficient new information over the preceding month from economic data or financial markets to necessitate an adjustment in the stance of monetary policy.”

However, the upcoming November meeting might paint a different picture. The board is set to receive “additional data on economic activity, inflation and the labour market, as well as a set of revised staff forecasts.”

“In reaching their decision, members noted that some further tightening of policy may be required should inflation prove more persistent than expected. The Board has a low tolerance for a slower return of inflation to target than currently expected,” the minutes detailed.

Full RBA minutes here.