The minutes of the Reserve Bank of Australia July meeting. The Bank hiked the cash rate by 50bps at this meeting, as the consensus expected.

Headlines via Reuters:

  • Board remains committed to doing what is necessary to ensure that inflation in Australia returns to the target over time.
  • Members agreed that further steps would need to be taken to normalise monetary conditions in Australia over the months ahead.
  • Members noted that gauging the level of the neutral rate is challenging in practice because it cannot be directly observed
  • Members considered the possibility of raising interest rates by 25 basis points or 50 basis points.
  • Level of interest rates was still very low for an economy with a tight labour market and facing a period of higher inflation.
  • Members discussed three points, first that current cash rate is well below the lower range of estimates for the nominal neutral rate
  • Members viewed it as important that inflation expectations remained well anchored and that the period of higher inflation be temporary.
  • This suggests that further increases in interest rate will be needed to return inflation to the target over time
  • Longer-term measures of inflation expectations were well anchored.
  • Neutral rate framework indicates that if inflation expectations rise, level of nominal interest rates required to return inflation to the target will be higher than otherwise
  • Inflation is forecast to peak later in 2022 and then decline back towards the 2 to 3 per cent range in 2023.
  • Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services

There is nothing to surprise in that lot.

Full text is here: