Committed to doing what is necessary to ensure inflation returns to target over time

Reserve Bank of Australia’s (RBA) June monetary policy meeting’s minutes showed that board members remained committed to doing what is necessary to ensure that inflation in Australia returns to the target over time.

Additional takeaways

Agreed that further steps would need to be taken to normalize monetary conditions in Australia over the months ahead.

Inflation was expected to increase further, before declining back towards the top of the 2 to 3 percent range in 2023.

Resilience of the economy was most evident in the labour market.

Members agreed that there was a material risk that inflation would not return to the target if current policy settings were maintained.

Board felt 25bps increases every meeting this year would be a rapid tightening.

Main argument for an increase of 50 basis points was that the level of interest rates was still very low.

Members noted that either 25 bp or 50 bp rate rise would leave the cash rate below 1%, which would still be highly stimulatory, and that further increases would be required.

Market reaction

AUD/USD turns south towards 0.6950 on the RBA Minutes release. The Minutes offers no new surprise and seems to have disappointed the hawks.

The pair was last trading up 0.19% on the day at 0.6962.

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