Board finds it difficult to either rule in or rule out future changes in the cash rate target
The Reserve Bank of Australia (RBA) considered the possibility of raising rates in its latest monetary policy meeting, before ultimately deciding that “the case to leave the cash rate unchanged was the stronger one.”
During the May 6 to 7 Reserve Bank board meeting, members noted generally stronger than expected recent data, with inflation having declined more slowly than anticipated, and labour market conditions having remained tighter than those consistent with full employment.
The RBA board, led by governor Michele Bullock (pictured), acknowledged that while recent data had been stronger than expected, the updates did not significantly alter the inflation trajectory, and holding the cash rate steady was deemed a prudent approach to mitigate potential slower demand growth and avoid pushing unemployment above full employment levels.
The Minutes of the May 2024 Monetary Policy Meeting of the Reserve Bank Board has been released: https://t.co/yoV6sPfchB
— Reserve Bank of Australia (@RBAInfo) May 21, 2024
“The case to hold the cash rate steady at this meeting was premised on the view that, while there had been notable updates on the state of the economy since the previous meeting, the updates had not been sufficient to warrant a change in the stance of monetary policy,” part of the minutes of the meeting read. “Inflation was still declining towards the target and the recent information did not materially alter its trajectory.
“Holding the cash rate steady could also be an appropriate way to mitigate the risk that future demand growth turned out to be slower than envisaged in the forecasts, bringing inflation back to target more quickly than assumed and pushing unemployment well above the level consistent with full employment.”
While returning inflation to target remained the central bank’s highest priority, members of its board believe the process would unlikely be smooth, considering the uncertainty about the outlook for both inflation and the labour market.
They then agreed that it was difficult either to rule in or rule out future changes in the cash rate target and reiterated the importance of paying close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.
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