The RBA board was so concerned about persistent inflation at its February board meeting that it didn’t even consider holding rates steady, as it did in December.
The Reserve Bank board was so concerned about persistently high inflation at its February board meeting that it did not even consider holding rates steady, instead contemplating a super-sized 0.5 percentage point increase., flagging that it intended to deliver at least two more rate rises when some economists had thought a pause was imminent.
Investors expect the cash rate will peak at 4.2 per cent in August, suggesting multiple additional rate rises are likely in coming months. Before the meeting, the cash rate was not expected to exceed 3.7 per cent.Unlike the December meeting, the board did not consider a pause, despite an expectation among some economists that the central bank was nearing the end of the fastest tightening cycle in a generation.
While the board settled on 0.25 of a percentage point, the minutes said the argument in favour of lifting by 0.5 of a percentage point was that inflation and wages data had continually exceeded expectations. In another hawkish sign, the board also noted that the cash rate was lower in Australia than in comparable economies, and little evidence that higher rates were more effective at dampening demand in Australia than elsewhere.are based on a cash rate of 3.75 per cent, but the minutes make multiple references to the uncertainty around projections for inflation and wages growth.
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