RBA minutes show intense focus on inflation and inflation expectations risks

<p>Reserve Bank of Australia November meeting minutes, Headlines via Reuters:</p><ul><li>
Considered case for raising rates or holding steady</li><li>Board saw "credible
case" that a rate rise was not needed at this meeting</li><li>But judged case for
hiking was the stronger one given inflation risks had increased</li><li>Whether further
tightening required would depend on data, assessment of risks</li><li>Saw risk that
inflation expectations could increase if rates were not raised</li><li>Important to prevent
even a modest further increase in inflation expectations</li><li>Growing mindset
among businesses that cost increases could be passed on to customers</li><li>Noted staff
forecasts for inflation at meeting assumed one or two more rate rises</li><li>Board noted cash
rate remained below that in many other countries</li><li>Rising house prices
could indicate policy was not especially restrictive</li><li>Surge in domestic
population growth made it harder to judge resilience of economy</li><li>Inflation and
economy were slowing, geopolitical and global outlook uncertain</li><li>An escalation in
tensions in the middle east could be a drag on global growth</li></ul><p>Bolding above is mine. Very hawkish!</p><p>There is some real meat in these minutes. That summary above has the usual 'data dependence', 'case to not raise rates', the usual caveats. But the over riding impression is of a Bank somewhat behind the curve, or risking slipping behind the curve, and keen not to do so. </p><p>These:</p><ul><li>Saw risk that inflation expectations could increase if rates were not raised
</li><li>Important to prevent even a modest further increase in inflation expectations
</li><li>Growing mindset among businesses that cost increases could be passed on to customers
</li><li>Noted staff forecasts for inflation at meeting assumed one or two more rate rises
</li><li>Board noted cash rate remained below that in many other countries</li></ul><p>are very hawkish indeed from the RBA. Yes, there are less hawkish remarks also, but overall this is a bit of a purpose from the Bank. </p><p><a href="https://www.rba.gov.au/monetary-policy/rba-board-minutes/2023/2023-11-07.html" target="_blank" rel="nofollow">Full text is here</a></p><p>AUD/USD higher. </p>

This article was written by Eamonn Sheridan at www.forexlive.com.