- Inflation globally remains high but looks like it may have peaked.
- Policy shifts and early reopening in China – expectations of higher production of steel; lifted iron ore and coking coal prices.
- Growth for Australia’s major trading partners – expected to be below average for next 2 years. Some risks eased, eg China’s changed approach to COVID containment.
- Uncertainties discussed re the global outlook with realistic scenarios present for weaker and for stronger inflation and growth than anticipated.
- Domestic economy – the easing in global inflation has not translated to the Australian economy as yet. Inflation had been expected to ease in coming months. Some areas still seeing strong demand pushing up prices.
- Latest inflation figures point to more ‘near-term underlying’ inflationary pressures than earlier thought.
- Due to end of post-pandemic recovery and pressure on finances, growth in consumption expected to slow in next quarters. High inflation and high interest rates limiting disposable income. Falls in net wealth due to housing market prices impacted spending.
- Large project pipeline providing positive outlook for business investment. Easing in materials shortages and supply chains but cost increases and labour issues, especially in construction sector, persisting. Slowing in dwelling investment and softening in demand by investors for dwellings with high density despite high rental demand.
- Inflation and domestic growth outlook uncertain with realistic possibilities for weaker and stronger results. Good terms of trade could boost activity beyond expectations while contractions and disinflation could result in different outcomes.
- Forecast for a drop in inflation subject to uncertainty. Global falls not evident here as yet. But wage and price setting by firms could impact demand and inflation.
- Inflation – confirmation that December was the peak won’t be known for several months. The pace and by how much inflation will decline in line with forecasts over the next few years is uncertain. Expectations for the medium-term rate remain well-anchored.
- Economic growth slowed recently and further slowing expected.
- Consideration of all issues, it was agreed that a further interest rates rise was needed.
- Options for rate rise considered – 0.25% and 0.5%. The stronger case was considered for the 0.25% decision. Arguments for both were strong. Less need for the larger rise as rates had already been increased significantly.
- Uncertainty around outlook but RBA Board meeting monthly provided opportunities to make an assessment of how the uncertainties were tracking and make policy adjustments accordingly.
- Further increases in interest rates would be needed in the months ahead to bring inflation closer to target.
February RBA Meeting Minutes reveal uncertainties re interest rates and inflation
- Inflation globally remains high but looks like it may have peaked.
- Policy shifts and early reopening in China – expectations of higher production of steel; lifted iron ore and coking coal prices.
- Growth for Australia’s major trading partners – expected to be below average for next 2 years. Some risks eased, eg China’s changed approach to COVID containment.
- Uncertainties discussed re the global outlook with realistic scenarios present for weaker and for stronger inflation and growth than anticipated.
- Domestic economy – the easing in global inflation has not translated to the Australian economy as yet. Inflation had been expected to ease in coming months. Some areas still seeing strong demand pushing up prices.
- Latest inflation figures point to more ‘near-term underlying’ inflationary pressures than earlier thought.
- Due to end of post-pandemic recovery and pressure on finances, growth in consumption expected to slow in next quarters. High inflation and high interest rates limiting disposable income. Falls in net wealth due to housing market prices impacted spending.
- Large project pipeline providing positive outlook for business investment. Easing in materials shortages and supply chains but cost increases and labour issues, especially in construction sector, persisting. Slowing in dwelling investment and softening in demand by investors for dwellings with high density despite high rental demand.
- Inflation and domestic growth outlook uncertain with realistic possibilities for weaker and stronger results. Good terms of trade could boost activity beyond expectations while contractions and disinflation could result in different outcomes.
- Forecast for a drop in inflation subject to uncertainty. Global falls not evident here as yet. But wage and price setting by firms could impact demand and inflation.
- Inflation – confirmation that December was the peak won’t be known for several months. The pace and by how much inflation will decline in line with forecasts over the next few years is uncertain. Expectations for the medium-term rate remain well-anchored.
- Economic growth slowed recently and further slowing expected.
- Consideration of all issues, it was agreed that a further interest rates rise was needed.
- Options for rate rise considered – 0.25% and 0.5%. The stronger case was considered for the 0.25% decision. Arguments for both were strong. Less need for the larger rise as rates had already been increased significantly.
- Uncertainty around outlook but RBA Board meeting monthly provided opportunities to make an assessment of how the uncertainties were tracking and make policy adjustments accordingly.
- Further increases in interest rates would be needed in the months ahead to bring inflation closer to target.
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