The Reserve Bank of Australia (RBA) recently contemplated a potential interest rate increase at its February meeting, according to the meeting minutes released on Tuesday.
The discussion arose due to ongoing concerns about persistent inflation in the country.
Despite the consideration, the RBA decided to maintain the official cash rate target at 4.35%. However, the minutes revealed that some members advocated for a 25 basis points hike.
During the meeting, the RBA adopted an unexpectedly hawkish stance, cautioning that interest rates might rise further if inflation remains higher than anticipated in the short term.
This perspective influenced the deliberations on a possible rate hike, although the bank ultimately opted to retain the current rate due to perceived easing risks regarding inflation returning to the 2%-3% annual target range within a "reasonable timeframe."
While recent data indicated a substantial easing of Australian consumer price index inflation by the end of 2023, it still exceeded the RBA's target. The RBA anticipates inflation to reach its target range by mid-to-late 2025, with the midpoint of the range expected only by 2026.
Additionally, the central bank foresees a further economic slowdown and an increase in unemployment. Despite this, the meeting minutes revealed the RBA's readiness to lower interest rates if the Australian economy experiences more significant weakness than initially anticipated.
The minutes emphasized that raising the cash rate target at this moment would not prevent the Board from implementing monetary policy easing measures in case of a more pronounced economic downturn.
Acknowledging continued uncertainty in the Australian economy in the coming months, especially amid worsening global economic conditions and an unpredictable inflation trajectory, the RBA remains vigilant.
Following the release of the minutes, the Australian dollar experienced a 0.2% decline.
Paraphrasing text from "Investing" all rights reserved by the original author.
