Minutes of the May 2024 Reserve Bank of Australia meeting.
Headlines via Reuters:
- 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 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, outlook for US and China revised upward
Here is the full text:
I am left a little confused by these Minutes. Some of the points made sound very hawkish indeed. But the Board is tolerant out to later than 2026? That is 30 months away. It seems to me the case for another hike would be if inflation wasn't expected to decline over a horizon of 24 months given that's a decent time for the transmission of policy changes.
I think, and this might just be me, that the Bank is gaming us here. Dishing out some fear in the hope folks in Australia will scale back on chasing higher prices with their dollars and driving inflation higher. If this is what the Bank is doing I applaud them.
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Next meeting is in mid-June:
