MNI BRIEF: RBA Sees Stronger Q3 CPI - Minutes

The Reserve Bank of Australia Board judged that September quarter inflation could be higher than expected and that the combination of stronger inflation and a steady labour market might imply staff had underestimated demand relative to supply, minutes of the September meeting showed Tuesday.

The Board agreed that monetary policy was “probably still a little restrictive,” though the degree was uncertain, prior to unanimously deciding to hold the cash rate at 3.6%. (See MNI RBA WATCH: Bullock Declines To Confirm Easing Bias)

It noted that financial conditions had eased further following the August cash rate cut, with rising housing prices and credit growth reflecting the earlier easing’s effects. Members agreed it would take time for the full impact to flow through the economy.

While risks to the outlook remained balanced, the Board debated their relative weight. On the upside, consumption could rebound more strongly than forecast, or capacity constraints might be tighter than assumed. On the downside, weak consumer sentiment, softening employment, and subdued wage indicators could point to slower activity, the board noted.

The Board reaffirmed that future decisions should remain cautious and data dependent, committing to monitor global and domestic developments, demand trends, and inflation and labour market dynamics. It reiterated its focus on price stability and full employment, and said it would act as needed to achieve these objectives.