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MNI BRIEF: Market Cash Rate Pricing Off - RBA Minutes

MNI (MELBOURNE) - The Reserve Bank of Australia board believes market pricing of the cash rate would not see inflation return to the 2.5% mid-point of its target by 2026, noting the rate may need to stay at 4.35% for longer to achieve its CPI goal, according to the minutes of the August meeting published Tuesday. 

The board noted the RBA and the market since early 2023 had consistently underpredicted inflation. “Based on what they knew at the time of the meeting, members agreed that monetary policy would need to be tighter than this implied path in order to bring inflation sustainably back to target within a reasonable timeframe,” the board stated. 

RBA-dated overnight index swaps have priced in a 25 basis point cut to the cash rate by the December meeting. 

“By contrast, holding the cash rate steady at this meeting – and possibly for an extended period – would be appropriate if members assessed that inflation was still broadly on track to return to target within a reasonable timeframe.”

The RBA held the cash rate steady at its last meeting. (See MNI RBA WATCH: Board Holds, Shrugs Off Market Volatility)

Daniel covers the Reserve Bank of Australia and the Reserve Bank of New Zealand and leads the Asia-Pacific team.
Central Bank NewsPolicy NewsAPACAustraliaBriefGlobalStoryRBARegion
Daniel covers the Reserve Bank of Australia and the Reserve Bank of New Zealand and leads the Asia-Pacific team.
Central Bank NewsPolicy NewsAPACAustraliaBriefGlobalStoryRBARegion

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