Minutes of the Reserve Bank of Australia May monetary policy meeting
Headlines via Reuters, bolding is mine:
- Australian economy was being supported by household and business balance sheets
- resilience of the Australian economy was particularly evident in the labour market
- members considered three options for the size of the rate increase at the present meeting – raising the cash rate by 15 basis points, 25 basis points or 40 basis points
- more timely evidence from liaison and business surveys indicated that labour costs were rising in a tight labour market and a further pick-up was likely over the period ahead
- agreed that raising the cash rate by 15 basis points was not the preferred option given that policy was very stimulatory and that it was highly probable that further rate rises would be required
- a 15 basis point increase would also be inconsistent with the historical practice of changing the cash rate in increments of at least 25 basis points.
- although rise in inflation largely reflected global factors, members noted that strong domestic demand and capacity constraints were also playing a role
- an argument for an increase of 40 basis points could be made given the upside risks to inflation and the current very low level of interest rates.
- members agreed that the preferred option was 25 basis points
- board considered whether the condition that it had earlier set for an increase in the cash rate had been met
- members observed that it would be more difficult to return inflation to the target if the inflation psychology in Australia were to shift in an enduring way
- a move of this size would help signal that the board was now returning to normal operating procedures
- would have the opportunity to review the setting of interest rates again within a relatively short period of time
- members agreed that further increases in interest rates would likely be required to ensure that inflation in Australia returns to the target over time
Full text:
Minutes of the May 2022 Monetary Policy Meeting of the Reserve Bank Board
The next RBA meeting is June 7. The only question on the coming rate hike at the June meeting is how large it will be, 15bp will take the rate to 0.5% while 40bps will take it to 0.75%. Those are only my guesses, perhaps the RBA will choose some other bp number to hike by.
The graph of the cash rate. The hike in May was the first rise in over 11 years. Its very difficult to even see the hike in the graph below.
