MNI BRIEF: RBA Board Stresses Future Hike Risk - Minutes

The Reserve Bank of Australia board aimed to stress the risk of further cash rate hikes due to high uncertainty over returning inflation to its 2-3% target band at the Feb 6 meeting, the published minutes showed Tuesday.

“Members agreed that it was appropriate not to rule out a further increase in the cash rate target,” the minutes noted.

Governor Michele Bullock took an agnostic stance towards the future path of the cash rate following the board’s decision to hold it at 4.35% earlier in the month. She stressed either cuts or hikes were possible. (See MNI RBA WATCH: RBA Bases Forecasts On 3.9% Cash Rate By Dec)

The minutes showed the board believed inflation would decline “a little quicker than previously thought” as goods price inflation had fallen more than expected and domestic demand softened. “But services inflation remained high and was still expected to decline only gradually as aggregate demand moderates and growth in labour and non-labour costs eases,” the minutes stated, adding any further slowing in goods prices would likely be modest.

MNI reported earlier in the month the fall in goods prices could lead the RBA to cut the cash rate by mid-year. (See MNI INTERVIEW: RBA To Cut By June - Ex-staffer)