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RBA minutes show RBA eyeing 40 basis point hike in May


  • Minutes of the Reserve Bank of Australia’s monetary policy meeting in May

Minutes of the Reserve Bank of Australia’s monetary policy meeting in May

Headlines via Reuters, the audacity is mine:

  • The Australian economy was supported by household and corporate balance sheets
  • the resilience of the Australian economy has been particularly evident in the labor market
  • members considered three options
  • more recent data from linkage surveys and enterprise surveys indicated that labor costs were rising in a tight labor market and that a further recovery was likely in the period ahead. to come
  • agreed that raising the cash rate by 15 basis points was not the preferred option as the policy was very stimulative and it was highly likely that further rate hikes would be required
  • a 15 basis point increase would also be inconsistent with the historical practice of changing the cash rate in increments of at least 25 basis points.
  • although going up inflation
  • an argument for a 40 basis point hike could be made given the upside risks to inflation and the current very low level of interest rates.
  • members agreed that the preferred option was 25 basis points
  • the board reviewed whether the condition it had previously set for an increase in the cash rate was met
  • members observed that it would be more difficult to get inflation back on target if the psychology of inflation in Australia were to change in a lasting way
  • a move of this magnitude would help signal that the council was now returning to normal operating procedures
  • would have the possibility of reviewing the setting of interest rates in a relatively short period of time
  • members agreed that further interest rate increases would likely be needed to ensure inflation in Australia returns to target over time

Full Text:

Reserve Bank Board May 2022 Monetary Policy Meeting Minutes

The next RBA meeting will be on June 7. The only question on the next rate hike at the June meeting is how big it will be, 15 basis points will take the rate to 0.5% while 40 basis points will take it to 0.75%. These are just my guesses, maybe the RBA will choose another number of basis points to increase.

The graph of the cash rate. May’s rise was the first rise in more than 11 years. It is even very difficult to see the upside in the chart below.

RBA minutes show RBA eyeing 40 basis point hike in May

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