Commerzbank’s Volkmar Baur highlights that RBA minutes show March’s back‑to‑back rate hike was a closer call than markets assumed. Board members agreed more tightening is needed but differed on timing, with the March move mainly aimed at preserving flexibility. Another hike in May is described as an option, increasingly likely if the Iran conflict persists and inflationary effects intensify.

RBA signals conditional May tightening risk

"The minutes of the Reserve Bank of Australia’s latest monetary policy meeting, released today, show that the decision to raise interest rates for a second consecutive time was actually somewhat closer than it might have seemed in the aftermath of the meeting. Understandably, the conflict with Iran is causing a great deal of uncertainty, as it is impossible to say with certainty how it will end, when it will end, or what the exact economic consequences will be."

"The minutes therefore show once again that while RBA members agreed that interest rates should be raised again in the near future, there was disagreement over whether this should happen as early as March or only at a later date."

"In this light, the decision should be interpreted as meaning that raising the key interest rate in March simply gave the RBA the flexibility to raise rates again in May, should the conflict persist until then and the inflationary effects become clearer."

"May is therefore an option, but not yet a foregone conclusion. However, the decision in May is likely to depend more on the Iran conflict and its repercussions than on “normal” economic developments."

"In this case, a prolonged conflict makes another rate hike is more likely than not."

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