RBA Minutes: Case to hold was stronger, upside risks to inflation were a significant concern

The Reserve Bank of Australia (RBA) published the Minutes of its October monetary policy meeting on Tuesday, highlighting that case for holding rate steady was stronger. Additional details of the RBA Minutes suggest that data on inflation, jobs and updated forecasts would be available at November meeting.

Key takeaways

“At October meeting board considered raising rates by 25bp or holding steady.”

“Board members judged that case for holding steady was the stronger one.”

“Members noted data on inflation, jobs and updated forecasts would be available at November meeting.”

“Members acknowledged upside risks to inflation were a "significant concern.“

“Progress in lowering service sector inflation was slow.”

“Board had low tolerance for a slower return of inflation to target.”

“Further tightening may be required if inflation more persistent than expected.”

“Rising house prices could support consumption, might be signal policy not as tight as assumed.”

“Full effects of past hikes would not be evident in data for some months.”

“Data suggested economy continued to grow modestly in the September quarter.”

“Members believed the labour market had reached a turning point.”

“Members noted there were few signs of wage price spiral materialising.”

“Fall in A$ vs US$ had eased monetary conditions, though only at the margin.”

“Trade weighted a$ only slightly lower than at start of year, limiting impact on imported inflation.”

“Challenges to China economy could impact Australia if not contained.”
 

Market reaction

At the time of writing, the AUD/USD pair is trading near 0.6356, holding higher while adding 0.22% on the day.
 

About RBA Minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.