Millions of home borrowers have told to forget more speed reductions because inflation is in danger of climbing again.
The reserve Bank lowered the interest rates last month for the first time since November 2020, but the minutes of that meeting, released on Tuesday, suggested that the board had little enthusiasm to keep the rates.
“They emphasized that the decision during this meeting recognized the progress that was made when reducing inflation, while the board was not committed to further alleviate the policy,” said the minutes.
The RBA minutes, of the most recent two-day meeting, also suggested that the cash rate could stay at 4.1 percent for a longer period, or even go up again.
“If the evolving data were to indicate that inflation turned out to be more persistent than expected, it would be reasonable to maintain a more limited point of view of the cash rate for an extended period at 4.1 percent – given the assessment of the members that this level would still be limited – or even to be tightened,” said it.
The Reserve Bank reduced the rates on 18 February and also released new predictions with the head inflation that climbs to 3.7 percent at the end of 2025, an increase of 2.4 percent in the quarter of December, after the $ 300 electricity discounts of the federal government.
“The headline inflation is expected to be more than 3 percent temporary due to the planned settlement of the costs of living,” said the minutes of February.
The consumer price index, at a quarterly basis, is now at a low point of three years and firm within the target of the reserve bank of two to three percent.
The reserve Bank lowered the interest rates last month for the first time since November 2020, but the minutes of that meeting, released on Tuesday, suggested that the board had little enthusiasm to lower the rates (depicted Governor Michele Bullock)
But KPMG headcurrent Brendan Rynne said that a rate reduction would be unlikely during the RBA's May meeting, which would take place after the late April release of the March's inflation data.
While the quarterly inflation is relaxed, other price measures show that the fight of the costs of living is by no means over.
Monthly inflation data for January showed the headline inflation by 2.5 percent, which was worse than the grade of 2.3 percent for November.
“The hotter-dan expected inflation figures support our prediction last week that the RBA will not follow its recent rate reduction with another in May,” said Dr. Rynne.
“The data also support the RBA guidelines for the market to be careful with the scope for further reductions in the short term.”
The Reserve Bank Minutes noted that Australia was the earlier cash rate of 4.35 percent, after the 13 rises in 2022 and 2023, lower than most other advanced economies.
“Members noted that not the interest rates had as high as in countries that had entered into similar inflation -meant that the board should be careful in the decision to lower the cash rate,” said it.
However, the existing cash rate of 4.1 percent of RBA is still much higher than the equivalent policy percentage of 3 percent of 3 percent, after six cutbacks there since last year.
The RBA minute also suggested that the cash rate could stay at 4.1 percent for a longer period, or even go up again (depicted his shoppers in Pitt Street Mall in Sydney)
It is also higher than the cash rate of 3.75 percent of new Zeeland, after four cuts in the Tasman.
The inflation of the services in Australia was still high at 4.3 percent in the quarter of December and new data released on Tuesday could make the RBA nervous.
Australian Bureau of Statistics Retail figures for January showed a monthly increase of 1.1 percent in editions for cafés, restaurants and collection meals.
Robert Ewing, the head of the company statistics of ABS, said that the expenses for leisure activities have risen, even before the last rate reduction of the reserve bank.
“Bumper crowds at large-scale events, including record rise at the Australian Tennis Open and Cricket Events, increased expenses in catering services,” he said.
Halving iron eater prices since 2021, as a result of a weaker demand from China for the raw material that is used to make steel, has also applied that Australia is now owing more money for the rest of the world.
The shortage in the current account of $ 52.4 billion for 2024 was the largest since 2016.
The Reserve Bank expects that the Australian dollar, which is now only worth 62 American cent, will remain weak, which runs the risk of keeping inflation high if the input is more expensive.
“The depreciation reflected wide US dollar strength in connection with the prospect of rates … and constant uncertainty surrounding the prospects for the Chinese economy,” said the RBA minute.
The last signal from the Reserve Bank is in contradiction with the financial markets, which expect more tariff reductions.
Westpac and the Commonwealth Bank are still expecting three interest rates that would reduce the cash rate to 3.35 percent for the first time since March 2023.
The following decision of the RBA's next monetary policy will be announced on 1 April, also known as April Fool's Day.
