AUD: RBA Minutes: Rate Hike Considered
Today RBA Meeting minutes for the May month Monetary meeting outcome is, Board members difficult to take decision either Rule in or Rule out for cash rate dependent on incoming data. Inflation will stay higher for Longer until 2026, Labour conditions are tightened, Consumer spending is lower, Financial conditions is remained restrictive, Over tightened will take economy to recession mode, So rate hike or hold for some times based on incoming data is the board outcome today.
AUDUSD is moving in Ascending channel and market has reached higher low area of the channel
The Reserve Bank of Australia (RBA) published the Minutes of its May monetary policy meeting on Tuesday, highlighting that the board members considered whether to raise rates and judged the case for maintaining steady policy as stronger. Additional details of the RBA Minutes suggest that the board agreed it was difficult to either rule in or rule out future changes in the cash rate, according to Reuters.
Key takeaways:
– The board considered whether to raise rates but judged the case for steady policy as stronger.
– The board agreed it was difficult to either rule in or rule out future changes in the cash rate.
– The flow of data had increased the risks of inflation staying above target for longer.
– The board expressed limited tolerance for inflation returning to target later than 2026.
– Staff forecasts were considered sound and presented a credible path back to target.
– The board noted that forecasts were predicated on a noticeably higher path for the cash rate.
– A 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.
– It was considered reasonable to look through short-term variation in inflation to avoid “excessive fine-tuning.”
– The labor market had proved tighter than expected, while consumer demand was weaker.
– Financial conditions in Australia were judged to be restrictive.
– Risks to global growth had become more balanced, with the outlook for the US and China revised upward.
AUD: RBA Considered Rate Hike in May
The Reserve Bank of Australia (RBA) released the minutes from its May monetary policy meeting today, revealing the board’s struggle to decide whether to rule in or rule out changes to the cash rate, with their decision heavily dependent on incoming data. The minutes highlighted several key points:
AUDCHF is moving in Ascending channel and market has reached higher low area of the channel
- Inflation Outlook: The board noted that inflation is expected to remain higher for longer, potentially extending until 2026.
- Labor Market Conditions: Labor market conditions are tight, contributing to the persistent inflationary pressures.
- Consumer Spending: Consumer spending has decreased, which impacts economic growth and inflation.
- Financial Conditions: Financial conditions remain restrictive, adding to the complexity of the monetary policy decision.
- Economic Risks: The board is concerned that over-tightening monetary policy could push the economy into recession. Thus, they emphasized a cautious approach to rate changes.
- Future Decisions: The board concluded that future rate hikes or holds would be determined based on incoming economic data, allowing them to adapt to evolving economic conditions.
In summary, the RBA board acknowledged the challenges of managing inflation, tight labor markets, reduced consumer spending, and restrictive financial conditions. They decided to take a data-dependent approach, weighing the risks of further tightening against the potential for economic recession.
The Reserve Bank of Australia (RBA) considered increasing interest rates during its May meeting, according to the minutes released on Tuesday, as it grappled with persistent inflationary pressures.
In April, the RBA had left its official cash rate target unchanged at 4.35% and adopted a less hawkish tone than the markets anticipated. While the bank acknowledged that inflation was becoming stubborn, it did not explicitly mention the possibility of another rate hike at that time.
However, the minutes revealed that policymakers did consider a rate increase, particularly due to concerns that inflation might not ease as quickly as initially forecast. Despite a slowdown in consumer spending, it remained relatively high, sustaining inflation. Tight labor market conditions also contributed to persistent inflation.
“A higher cash rate might also be required, even with ongoing weakness in aggregate demand, if other factors slowed the pace of disinflation,” the RBA noted in its minutes. “This could occur if trend productivity growth turned out to be weaker than assumed, unless wages growth were to moderate in response. A drift higher in inflation expectations, should it occur, would also make it more costly to return inflation to target.”
Ultimately, the RBA decided to leave rates unchanged, with committee members still seeing a path back to the bank’s 2% to 3% inflation target by mid-2025 and assessing that the risks over inflation remained largely balanced. The outlook for future rate decisions remains uncertain amid economic unpredictability.
The RBA expects Australian economic conditions to cool further in the coming months, with a deteriorating labor market, trends which are anticipated to help inflation meet the bank’s target within its forecast period.
Since 2022, the RBA has raised rates by a cumulative 425 basis points to combat a post-COVID spike in inflation. While this has reduced inflation from 30-year peaks, the pace of disinflation has slowed in recent months.
AUD: RBA Keeps Door Open for Rate Hike
The Reserve Bank of Australia (RBA) released the minutes from its May monetary policy meeting today, outlining the challenges faced by the board in deciding on future cash rate adjustments. Key points from the meeting include:
- Inflation Projections: Inflation is expected to remain elevated, potentially extending until 2026.
- Labor Market: Tight labor market conditions are contributing to sustained inflation.
- Consumer Spending: There has been a noticeable decrease in consumer spending.
- Financial Conditions: Financial conditions remain restrictive, complicating the decision-making process.
- Economic Risks: The board is wary of over-tightening, which could push the economy into recession.
Given these factors, the board decided that future decisions on rate hikes or holds will be based on incoming economic data, emphasizing a cautious and adaptable approach to monetary policy.
The Reserve Bank of Australia (RBA) has kept the possibility of another rate hike open, while acknowledging that the risks of resurgent price pressures have escalated.
AUDCAD is moving in Ascending channel and market has reached higher low area of the channel
Fresh meeting minutes released on Tuesday morning, following the RBA’s May 6-7 monetary policy meeting, indicated that inflation had eased more slowly than anticipated, creating “considerable uncertainty.”
“Members agreed that it was important to convey that recent data and other information had signaled that the risks around inflation had risen somewhat,” the meeting minutes read. “A higher cash rate might also be required, even with ongoing weakness in aggregate demand, if other factors slowed the pace of disinflation.”
The May board meeting came after hotter-than-expected March quarter inflation figures surprised analysts and stoked fears that the RBA would resume its aggressive run of interest rate increases.
While the RBA ultimately kept the cash rate steady, the meeting minutes show that the RBA again considered further tightening.
Separate data since the meeting indicated that wages growth has peaked and the jobs market is beginning to loosen. Traders have increased their bets on rate cuts, ascribing a 50 percent chance of a cut at the RBA’s December meeting. Markets are fully priced for a 25 basis point cut by April 2025.
Although the RBA board ultimately kept the cash rate on hold at a 12-year high of 4.35 percent, the meeting minutes showed the central bank again considered the case for a rate hike, an option it had also considered at its previous meeting in March.
RBA officials have kept the cash rate on hold since November, balancing the risks of overdoing interest rate increases and sparking an economic downturn against the risk of allowing price pressures to rebound and exceed its 2 to 3 percent target band.
As the RBA’s 13 rate increases since May 2022 work to slow the economy, separate data released on Tuesday morning showed households remained deeply pessimistic about the economy even as Treasurer Jim Chalmers unveiled another round of cost of living support.
Westpac’s Consumer Sentiment Index dipped a further 0.3 percent in May as fears that persistently high inflation may require further tightening of monetary policy outweighed the “well-received” measures for households in last week’s federal budget.
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