RBA December Minutes: Further rates hikes will likely be needed to balance supply & demand

Reserve Bank of Australia December meeting minutes

Headlines via Reuters:

• Board considered hiking by 25bp, 50bp or pausing at the December meeting
• Board saw arguments
  for each option but the 25bp hike had the strongest case
• A range of options for
  the cash rate will be considered in coming meetings
• Further rise in
  rates likely to be needed to balance demand and supply in the economy
• Board noted no other
  central bank had yet paused its tightening
• Important to act
  consistently on policy, no clear impetus from data to change from
  25bp moves
• Ready to return to
  larger hikes if needed, or to leave rates unchanged for a period
• Not on pre-set
  policy path, pace and peak for rates depends on incoming data
• Cash rate had
  already risen significantly, though not yet at a high level
  historically
• Noted mortgage
  payments to match the record high in 2023, real incomes and house prices
  falling
• The labour market is still
  very tight, inflation mindset changing as firms more ready to pass on
  costs
• Data on private
  sector wages suggested “balance of risks had shifted to the
  upside”
• Liaison with firms
  suggested wages growth had continued to pick up in Q4
• Slowdown in October
  monthly CPI was welcome, but should be treated with caution
• Some signs of easing
  supply pressures, a sustained decline in inflation expected over 2023

And, some verbatim:

• Members emphasised that the Board’s priority is to re-establish low inflation and return inflation to the 2 to 3 per cent target range over time.
• High inflation damages the economy and makes life more difficult for people.
• The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.
• The Board did not rule out returning to larger increases if the situation warranted. Conversely, the Board is prepared to keep the cash rate unchanged for a period while it assesses the state of the economy and the inflation outlook

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I guess if your view is that the RBA will not be hiking any further there are a few straws you can clutch at in the minutes. On balance though I am happy to stay with my view that there are further rate hikes to come. The RBA next meet on February 7 and I expect another +25bp rate hike then.

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Full text is here:

Minutes of the December 2022 Monetary Policy Meeting of the Reserve Bank Board

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aud
AUD

The Australian dollar (AUD) is the official currency of Australia, which is also used in Christmas Island, Cocos (Keeling) Islands, Norfolk Island, as well as independent pacific states.Introduced in 1966, the AUD is currently the fifth most traded currency in the world, behind only the US dollar, euro, Japanese yen, and British pound.The currency is very important to forex markets and is routinely used as a carry trade against other majors.The Reserve Bank of Australia (RBA) is the central banking authority tasked with the management and issuance of AUD banknotes.What Factors Affect the AUD?The AUD is more susceptible than other currencies to macroeconomic factors. Overall, monetary policy is the largest mover of the currency, including interest rate differentials.Beyond Australia, commodity prices such as those of precious metals and others are also important to the AUD and can cause fluctuations in its value relative to other currencies.Global risk sentiment and confidence are also indicators that are closely tracked given their correlation to the AUD.This is due to the AUD being seen as a commodity currency, and also used as one of the most popular growth and risk proxies in global financial markets.Any positive mood in the global market will likely cause the AUD to climb, while if there is a prevailing pessimism, the AUD will often decline.On a domestic scale, government credit ratings can also impact the AUD. Australia’s credit rating influences the risk profile of its debt.This trend directly influences the cost the government has to pay on the debt it owes.

The Australian dollar (AUD) is the official currency of Australia, which is also used in Christmas Island, Cocos (Keeling) Islands, Norfolk Island, as well as independent pacific states.Introduced in 1966, the AUD is currently the fifth most traded currency in the world, behind only the US dollar, euro, Japanese yen, and British pound.The currency is very important to forex markets and is routinely used as a carry trade against other majors.The Reserve Bank of Australia (RBA) is the central banking authority tasked with the management and issuance of AUD banknotes.What Factors Affect the AUD?The AUD is more susceptible than other currencies to macroeconomic factors. Overall, monetary policy is the largest mover of the currency, including interest rate differentials.Beyond Australia, commodity prices such as those of precious metals and others are also important to the AUD and can cause fluctuations in its value relative to other currencies.Global risk sentiment and confidence are also indicators that are closely tracked given their correlation to the AUD.This is due to the AUD being seen as a commodity currency, and also used as one of the most popular growth and risk proxies in global financial markets.Any positive mood in the global market will likely cause the AUD to climb, while if there is a prevailing pessimism, the AUD will often decline.On a domestic scale, government credit ratings can also impact the AUD. Australia’s credit rating influences the risk profile of its debt.This trend directly influences the cost the government has to pay on the debt it owes.
Read this Term is little changed.