The Reserve Bank did not consider the case for an additional increase to interest rates at its March meeting, marking the first time since the start of its aggressive run of rate hikes that it did not float the option.
But in the minutes of its March 18-19 meeting, released on Tuesday, the RBA’s board members noted continued uncertainty regarding the outlook for inflation, and declared more time was needed to rule out any further rate hikes in future.
“Members agreed that leaving the cash rate target unchanged at this meeting was the best way to achieve the Board’s strategy of supporting a gradual return of inflation to target and the labour market to full employment,” the board said after leaving the cash rate at a 12-year high of 4.35 per cent.
“It was appropriate to characterise the policy outlook as one in which it was difficult to either rule in or out future changes in the cash rate target.”
In the previous minutes for its February meeting, the board had “considered whether to raise the cash rate target by a further 25 basis points”, but this was not mentioned in the latest iteration.
The minutes also detailed how households and businesses were faring under the weight of its run of rate hikes to date.
“Financial conditions for households remained restrictive, though financial conditions for businesses had eased a little over prior months,” the minutes read.
The board also noted some households were finding it difficult to service their debts and meet essential expenses.
“However, rates of arrears on housing loans were still low and banks had recently reduced their forecasts of potential loan losses,” the board agreed.
The RBA forecasts inflation, currently 3.4 per cent on its most recent measure, will fall within its 2 to 3 per cent target band by December 2025.
Investors expect the RBA’s next move will be a cut, with money markets fully priced for a 25 basis point easing in the cash rate at the RBA’s September board meeting.
The RBA is widely expected to lag behind many other major central banks that are already indicating they could move to cut interest rates in the near-term.
Ahead of its next interest rate decision and full set of staff forecasts, scheduled for release on May 7, the RBA will receive updated inflation figures for the March quarter.
More to come.