MNI BRIEF: RBA Considered 50bp and 25bp Hike At Feb Meeting
The Reserve Bank of Australia discussed a 50bp hike at its February 7 meeting, but stuck with its recent stance of 25bp rises given the uncertain outlook and the ability to adjust policy due to the frequency of its meetings, according to the minutes released on Tuesday.
"The arguments for a 50 basis point increase stemmed from the concern that there had been a pattern of incoming prices and wages data exceeding expectations, and a risk that high inflation would be persistent," the RBA said.
The RBA instead raised rates 25bp to 3.35% and delivered a hawkish statement that telegraphed additional rate hikes would be needed to steer inflation back to its 2-3% target. (See MNI RBA WATCH: Hawkish Shift Puts 25bps On Table In March)
"Members acknowledged that there were arguments in favour of both options, but concluded that the case to increase the cash rate by 25 basis points at the present meeting was the stronger one. Members noted the uncertainty around the outlook and that the monthly meetings provided the Board with frequent opportunities to assess how these uncertainties were being resolved and to adjust policy if needed," the RBA said.
The Australian dollar moved higher after the minutes were released. (See AUD : Higher on RBA Minutes, But Limited Follow Through). Another 25bp hike is expected at the March 7 meeting. (See RBA : Inflation Concerns At The Fore, More Hikes Ahead But Likely At 25bp Pace)