RBA interest rates: September board minutes show a ‘step-down’ in tone but focus still on taming inflation
The Reserve Bank has dropped its guidance that a near-term cut to interest rates is unlikely — but has made it clear their next move could be in either direction.
The RBA held rates at 4.35 per cent at the September meeting, where they have remained since November 2023.
Another rate hike could be on the cards if household spending bounces faster than expected, or inflation fails to move back to target, the meeting minutes show.
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While the RBA board had in August said “it was unlikely that the cash rate target would be reduced in the short term”, the September notes omit that line.
It backs up governor Michele Bullock’s revelations after the meeting that the board had not specifically considered a hike.
The bank has still hedged its bets, outlining the case for both a hike or a cut in the months ahead.
The RBA will also ignore moves by overseas central banks to cut rates, declaring Australia’s job market is stronger and inflation has yet to fall as much.
On Tuesday morning, ANZ said “the minutes contain a clear step down in the RBA board’s hawkishness”.
“This leaves the door open to a shift to neutral by the end of this year and then easing in early 2025. We continue to expect the first cash rate cut in February 2025”.
The bank’s board found there was some evidence underlying inflation — a measure of prices which strips out volatility — was easing but expected to remain above target.
Underlying inflation fell about one percentage point over three months to be 3.4 per cent in August. The bank said the quarterly fall had not been as significant, however.
“Recent data on inflation had been consistent with a further gradual easing in underlying inflationary pressures,” the minutes said.
“Looking ahead, monthly CPI data for August (released the day after the meeting) was expected to show a sharp decline in headline inflation, partly because of Federal and State government cost-of-living relief.
“But underlying inflation was expected to remain above target.”
More to come
