RBA minutes show Australians narrowly dodged an April rates hike, but further rises loom

Minutes from the Reserve Bank’s April meeting show the bank gave serious consideration to an 11th consecutive cash rate hike before deciding to press the pause button.

The Reserve Bank released its minutes from this month’s meeting on Tuesday, highlighting the reasoning behind the pause.

The RBA announced its decision to pause rates rises on April 4, leaving the cash rate target unchanged at 3.6 per cent.

Minutes from the much-anticipated decision at the time showed that it wasn’t a call made lightly, but after much deliberation, RBA members agreed that “there was a stronger case to pause at this meeting and reassess the need for further tightening at future meetings”.

Members agreed that more data and updated forecasts would be helpful in deciding whether or not to hike rates further in an effort to curb inflation.

As such, the RBA said the purpose of the April decision was to allow more time to gather additional information.

City Index Senior Market Analyst Matt Simpson suggested that the latest minutes raised some “cause for concern” regarding future rate hikes.

“The RBA acknowledged that their usual pattern is to pause near the end of the tightening cycle, without it necessarily being the end of the tightening cycle. And having looked back through their data, I see that there has always been a pause or more before the peak rate has been set,” Mr Simpson said.

“And that makes the incoming data the more important, given we’re due to see quarterly CPI, updated labour data, retail trade and building approvals ahead of the next meeting.”

Mr Simpson said that the quarterly CPI report, expected next Wednesday, was “hands down” likely to be the decider if we’re in for another rates hike at May’s meeting.

The RBA’s minutes also indicated that there were arguments for further rate rises in April as it continued to try and bring the inflation rate down from 7.8 per cent to its 2-to-3 per cent target.

The central bank is worried that higher population growth could put more strain on inflation. Board members discussed increased migration forecasts in April’s minutes, which would put further demand on housing.

April’s minutes also included a discussion around wage rises and the fact that an increase in wages, particularly in the public sector, was another case for bumping up rates in the future.

While a further lift to interest rates might seem likely in May, time will tell as to whether or not the central bank goes through with that decision.