PT Solid Gold Berjangka | RBA Discussed Raising Rates Again in September, Opted to Pause

02:00 19 September in Fiscal & Monetery, Global, SOLID GOLD BERJANGKA | SOLID GROUP

Australia’s central bank considered the case for raising interest rates this month, but decided to leave them unchanged for a third straight meeting, underscoring a higher hurdle to further policy tightening.

The Reserve Bank opted to stand pat amid concerns its rapid-fire hikes since May 2022 that took the cash rate to 4.1% could slow the economy more sharply than forecast, minutes of the Sept. 5 meeting, Philip Lowe’s last as governor, showed Tuesday. Members pointed to lags in policy transmission while noting higher borrowing costs are already beginning to align demand with supply.

The RBA did leave the door ajar to further hikes to help bring inflation back to target, while signaling this would require economic data to surprise on the upside.

“Some further tightening in policy may be required should inflation prove more persistent than expected,” the RBA said. “In assessing the need for such a move, members affirmed that they will be guided by the incoming data and how these alter the economic outlook and the assessment of risks.”

Australia raised rates by 4 percentage points between May 2022 and June this year as it sought to gain control over inflation. Lowe has aimed to bring down consumer prices while holding on to some of the job gains achieved during the pandemic, a task that now falls to his successor, Governor Michele Bullock.

Economists still expect one more hike by the RBA later this year, while financial markets reckon the tightening cycle is all but over. Australia’s benchmark policy rate is lower than many other developed nations despite inflation being at least as high. Its 4 points of hikes trail both the US and New Zealand’s 5.25 points.

The RBA reiterated that recent data signaled the economy remains on a narrow path in which inflation returns to target while employment and the economy continue to grow.

Data last week showed Australia’s job market remains tight with the unemployment rate hovering in a 3.4-3.7% range over the past year despite the RBA’s tightening campaign. At the same time, wages growth has picked up at a slower pace than elsewhere, implying Australia can avoid the price-wage spiral seen in many developed economies.

The case to raise rates centered on the risk that inflation might prove stickier than anticipated and may not meet the current forecast of it falling back within the 2-3% target by late 2025.

Source : Bloomberg


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