TD Securities’ Prashant Newnaha notes that three Reserve Bank of Australia cash rate hikes this year have tightened domestic financial conditions, with activity slowing broadly in line with Bank expectations. The Minutes show the Board views policy as somewhat restrictive and is inclined to pause and assess how the economy is adjusting, even as excess demand and inflationary pressures persist.

RBA minutes highlight restrictive stance

"Three RBA cash rate hikes delivered this year have helped tighten financial conditions, with the subsequent slowing in activity consistent with Bank expectations. The Board has not ruled out lifting the cash rate again, but the hurdle for near-term policy tightening is now higher."

"Members continued their assessment of the tightness of financial conditions by considering evidence from a broader range of indicators. These generally showed that the tightening in monetary policy was starting to be transmitted to the economy through various channels. Conditions in the established housing market had softened and housing credit growth looked set to slow in the period ahead."

"Members judged that Australian financial conditions were now somewhat restrictive, although this remained uncertain. It would take some time to assess the ultimate impact on the economy of the tightening in monetary policy since February but, at this stage, it appeared to be having broadly the expected effect."

"Taking these considerations together, members judged that there was merit in using the space provided by the Board’s earlier decisions to raise the cash rate target to assess how the economy was adjusting and the impact of disruptions to oil supply."

"The cash rate target sat at around the top of the range of these model estimates, and above the range of market economists’ estimates of the neutral rate."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)