RBA minutes: Board discussed scenarios for both lowering and raising interest rates

Reserve Bank of Australia September meeting minutes

• Board discussed scenarios for lowering and raising interest rates in the future.
• Board members felt not enough had changed from previous meetings, and that the current cash rate best balanced risks to inflation and the labor market.
• Future financial conditions might need to be tighter or looser than at present to achieve the Board’s objectives.
• Scenarios for lowering, holding, and raising rates are all conceivable given the considerable uncertainty about the economic outlook.
• Policy could be held restrictive if consumption growth picks up materially.
• Policy could be tightened if present financial conditions are insufficiently restrictive to return inflation to target.
• Policy could be eased if the economy proves significantly weaker than expected.
• It is not necessary for the cash rate to evolve in line with policy rates in other economies.
• The Board remained vigilant to upside risks to inflation.
• Underlying inflation is still too high.
• Risks around the outlook for Australia’s exports had shifted to the downside since the previous meeting.
• Many households are still experiencing financial pressure, but only a small share of households and firms are unable to service loans.
• Policy will need to remain restrictive until Board members are confident inflation is moving sustainably towards the target range.
• It is not possible to rule in or out future changes in the cash rate target at this time.
• The Board discussed a staff review of the Term Funding Facility, and the TFF should remain an option for unconventional monetary policy.

A pretty clear hawkish bias here, this:

• “Policy will need to remain restrictive until Board members are confident inflation is moving sustainably towards the target range.”

means we need to see data that will increase RBA confidence it’ll be hitting CPI targets. The data is moving, generally, in that direction. I’m not sure on the sort of run of numbers we’ll need to see though.

The next official inflation data is due on October 30.

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Still to come – Deputy Governor Hauser speaking at the top of the hour.

This article was written by Eamonn Sheridan at www.forexlive.com.