MNI BRIEF: RBA Debated Dec Pause; "Range Of Options" In '23

The Reserve Bank of Australia discussed pausing its rate hiking cycle at its December meeting and said a "range of options" for the cash rate could be considered at upcoming meetings in 2023, according to minutes of its December meeting.

The case for a pause was based on the cumulative 275bp of tightening ahead of the meeting and the uncertain economic outlook, but board members noted that even with further rate hikes incorporated in its November forecasts the inflation rate was was expected to take several years to return to the 2-3% target range. A 50bp and 25bp rate increase was also discussed at the meeting.

A 25bp hike was viewed as necessary to better align supply and demand, as well as to telegraph policy consistency. However, policy makers said a tightening bias remains, with the board expecting to increase interest rates "over the period ahead".

The minutes showed the RBA would maintain policy flexibility in 2023 by considering a "range of options" in 2023. "The Board did not rule out returning to larger increases if the situation warranted. Conversely, the Board is prepared to keep the cash rate unchanged for a period while it assesses the state of the economy and the inflation outlook." (See MNI RBA WATCH: RBA Hikes By 25bps, February Increase On Radar)