Reserve Bank’s minutes to put spotlight on rates pause
Poppy Johnston |
The last cash-rate decision was likely down to the wire, and the minutes from the Reserve Bank board meeting will reveal just how finely balanced it was.
Last month the Reserve Bank of Australia board opted to keep interest rates on hold at 4.1 per cent.
The pause followed 400 basis points of hikes since May last year as the central bank took on a surge in inflation.
The minutes, due on Tuesday, are expected to show a conflicted call between another 25 basis point hike and staying on hold, as the RBA approaches the end of its hiking cycle.
There may not be much more to glean from the document, given the governor, Philip Lowe, made a few remarks on the July decision during a speech last week.
Most economists agreed the governor was less insistent in his speech about the need for more interest rate hikes, but more tightening has not been ruled out.
The central bank will critically get fresh data on the labour market, as well as the quarterly inflation reading, ahead of the August decision.
The board will be looking for signs that inflation is coming down convincingly, after it rose seven per cent annually in the March quarter.
An easing labour market will also be welcomed by the RBA as a sign that its interest rate hikes are weighing on demand and slowing economic activity, as intended.
The unemployment rate fell to 3.6 per cent in May, from 3.7 per cent in April.
Deteriorating economic conditions have been weighing on consumers’ minds, with the weekly sentiment gauge produced by ANZ and Roy Morgan recording one of the five worst results since the COVID outbreak.
The measure of confidence has been stuck well below the monthly average of 111.1 since 1990, sinking 0.7 points to 72.6 last week.
The index fell to a record low for renters, as demand for housing outstrips supply to push up rents.
Weekly inflation expectations rose 0.1 percentage points to 5.6 per cent, with the four-week moving average hanging on at 5.7 per cent.
AAP
