MNI BRIEF: RBA Board Sees Persistent Inflation - Minutes

Reserve Bank of Australia board members judged inflation remained too high, with underlying price pressures running above the central projection from six months earlier, a key factor behind the decision to lift the cash rate 25 basis points to 3.85% earlier this month, published minutes showed Tuesday.

Members noted staff assessed that while much of the recent inflation rise reflected less-persistent factors that should fade, a meaningful share stemmed from underlying pressures likely to persist under current policy. (See MNI RBA WATCH: Bullock Says Policy Too Loose, Hikes 25BP) As a result, the central inflation forecast was revised materially higher, remaining above target through 2026 and returning close to the 2.5% midpoint only around mid-2028, assuming the cash rate follows the market path.

Model estimates suggested spare capacity had diminished, with aggregate demand now clearly exceeding supply and the labour market still somewhat tight. Stronger-than-expected output growth, resilient global activity — particularly in East Asia and the U.S. — and firmer labour conditions had added to capacity pressures.

Downside risks to full employment had eased, with resilient jobs growth, only gradual wages moderation and high unit labour costs signalling ongoing labour market tightness. Members also noted financial conditions had eased materially since mid-2025, concluding excess demand was unlikely to correct if the cash rate remained at 3.60%.