RBA Minutes: Board considered whether to raise rates

The Reserve Bank of Australia (RBA) published the Minutes of its May monetary policy meeting on Tuesday, highlighting that the board members considered whether to raise rates and judged the case for steady policy as the stronger one. Additional details of the RBA Minutes suggest that the board agreed it was difficult to either rule in or rule out future changes in the cash rate, per Reuters.

Key takeaways

“Considered whether to raise rates, judged case for steady policy the stronger one.”

“Board agreed difficult to either rule in or rule out future changes in the cash rate.”

“Flow of data had increased risks of inflation staying above target for longer.”

“Board expressed limited tolerance for inflation returning to target later than 2026.”

“Staff forecasts were considered sound, presented credible path back to target.”

“Board noted forecasts were predicated on a noticeably higher path for the cash rate.”

“Rate rise could be appropriate if forecasts proved overly optimistic.”

“Risks around the forecasts were judged to be balanced.”

“Importantly, inflation expectations remained well anchored.”

“Reasonable to look through short-term variation in inflation to avoid "excessive fine tuning”.”

“Labour market had proved tighter than expected, consumer demand weaker.”

“Financial conditions in Australia were judged to be restrictive.”

“Risks to global growth had become more balanced, the outlook for the US and China revised upward.” 

Market reaction

At the time of writing, the AUD/USD pair is trading near 0.6669, holding higher while adding 0.04% on the day.