RBA to air board’s disagreement in meeting minutes
The minutes of the Central Bank’s cash rate meeting in March should make interesting reading.
The monetary policy board’s 5-4 margin in favor of a 25 basis point increase was the shortest since the RBA began publishing unattributed votes in July 2025.
Governor Michele Bullock has already explained what’s behind the divide.
“All members agreed that another rate hike was necessary to address domestic inflation pressures,” he told reporters after the March 17 meeting.
He said the difference of opinion had to do with timing.
The five hawks, who ultimately had their way, argued that the global energy shock caused by the Middle East conflict would worsen already very high inflation.
Inflation expectations were already rising and needed to be met quickly, or they would risk remaining flat.
But the four doves argued that, given all the uncertainty, it would be wiser to wait and see until May.
“This would give us the opportunity to consider more data on inflation and the labor market,” Ms Bullock said.
“And perhaps it would have provided some more clarity on the potential impact of the conflict in the Middle East.”
That much is known, but meeting minutes to be released Tuesday may provide more insight into how likely another surge is in May.
“Of most interest will be those that shed light on any potential terminal level of the cash rate and the arguments for and against tightening in March,” economists from ANZ Bank said.
The four opponents may agree that another raise is needed, albeit in May instead of March, but now that it’s flowing into the economy, will they be satisfied that the job is done for now?
If so, all they need is another hawk to sabotage another hike in May.
They may be convinced that the longer the war goes on, the more it will drag down economic growth and threaten the other side of the bank’s dual mandate.
“There is a risk that some board members will weigh more on the downside risks to employment and unemployment, leading to less tightening,” economists from the Commonwealth Bank said.
Markets have reduced bets on a rate hike in May since the last meeting but still price the chances of a hike at more than two-thirds.
One thing the RBA board will be keeping a close eye on ahead of its next meeting will be the labor market.
Ms Bullock said there was general agreement that the job market was in a much better place than the board had previously thought, and the risks were tilted towards inflation rather than employment.
National Australia Bank economists Jessie Cameron and Josh Copeland said job vacancy data to be published by the Australian Bureau of Statistics on Thursday would therefore be watched closely for signs of a recovery in labor demand.
The ABS will also publish February construction approval figures on Wednesday.
ANZ expects a 6 per cent increase after a 7.2 per cent drop in January.
Meanwhile, Wall Street investors’ risk appetite remains understandably low due to conflicts in the Middle East.
Each of the three major US indexes closed at their lowest levels in more than seven months on Saturday Australian time.
Dow Jones index decreased by 793.47 points (1.73 percent) to 45,166.64 points, S&P500 index decreased by 108.31 points (1.67 percent) to 6,368.85 points and Nasdaq decreased by 459.72 points (2.15 percent) to 20,948.36 points.
Australian stock futures fell 65 points, or 0.76 percent, to 14,263.
The S&P/ASX fell 9.4 points on Friday, falling 0.11 percent to 8,516.3 points, while the All Ordinaries index lost 13.7 points, or 0.16 percent, to 8,712.8 points.
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