The Minutes of the February monetary policy meeting were published by RBA on Tuesday. Aussies were cautioned about the "high" level of economic uncertainty, and the central bank voted to hold rates steady on Tuesday.
During the meeting, there was a discussion among the central bank board about the possibility of raising the cash rate. Although the official cash rate target was ultimately kept unchanged at 4.35%, the minutes of the RBA's February meeting revealed that some members advocated for a 25 basis points increase. The RBA took on an unexpectedly hawkish stance, cautioning that interest rates might still be raised if inflation remained persistently high in the near future. This consideration of a rate hike was driven by the concern that inflation might not return to the desired 2%-3% annual target range within a reasonable timeframe. However, the bank decided to maintain its current stance, prioritizing the easing of risks over the potential threat of inflation.
According to the minutes, there was a significant level of uncertainty regarding the economic outlook. Members also noted that the potential costs of inflation not reaching the desired target within the expected timeframe were substantial. Consequently, members reached a consensus that it would be suitable to consider the possibility of a future increase in the cash rate target, rather than dismissing it entirely.
They emphasized that increasing the cash rate target now would not prevent the Board from easing monetary policy if the economy were to weaken more sharply than envisaged. The bank noted continued uncertainty over the Australian economy in the coming months, especially as global economic conditions worsened and the path of inflation remained uncertain.
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