RBA Minutes from Dec Meeting: members considered whether to raise the cash rate target by a further 25 basis points or to hold the cash rate target steady; board noted RBA staff forecast had inflation returning to the top of the band by the end of 2025

• Board considered whether to raise rates by 25BP or hold steady.


• RBA decided the case for steady rates was the stronger one at this meeting.


• The board saw "encouraging signs" of progress on inflation, and this needed to continue.


• Whether further tightening is required would be decided by data and assessment of risks.


• Recent data had not warranted a material change to the economic outlook.


• The board saw value in waiting for more data to assess the balance of risks.


• The risk of inflation could stay high too long balanced by the risk of a sharper slowdown in demand.


• Liaison with firms showed they expected price increases to moderate in the year ahead.


• Consumption growth is quite weak, with many households facing a painful squeeze on finances.


• However, domestic demand is still running ahead of supply, and inflation is above several other countries.


• The board noted RBA staff forecast had inflation returning to the top of the band by the end of 2025 rather than the midpoint.


• The board discussed RBA plans for government bond holdings and agreed for now to keep them to maturity.


• The board will continue "active consideration" of whether to sell bonds before maturity.


• They discussed whether it's best to sell bonds to the market or to the government's AOFM.


• Judged that selling bonds to AOFM would have several practical benefits.

Via RBA

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Analysis details (00:30)

MEETING RECAP: RBA bank kept the Cash Rate Target unchanged at 4.35%, as expected, and reiterated its forward guidance on whether further tightening is required to ensure inflation returns to the target in a reasonable timeframe will depend upon data and evolving assessment of risks. RBA also repeated that the Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome, as well as noted there are still significant uncertainties around the outlook and that the limited information received on the domestic economy since the November meeting has been broadly in line with expectations. The language from the central bank was largely reiterations of the commentary from the prior meeting and therefore less hawkish than many were anticipating considering the rhetoric from RBA Governor Bullock in the weeks leading up to the meeting who was more forceful in her warnings that inflation remained a crucial challenge and had stated that more substantial monetary policy tightening is the right response.

19 Dec 2023 - 00:30- Fixed IncomeImportant- Source: RBA