The Reserve Bank of Australia’s (RBA) February meeting minutes indicate that future increases to the cash rate are not guaranteed, according to ANZ’s head of Australian economics, Adam Boyton. This comes despite the board’s unanimous decision to raise the cash rate at the meeting. Policymakers emphasised the uncertainty surrounding the economic outlook, acknowledging risks to inflation on both sides. This limits confidence in any definitive trajectory for interest rates in the coming months.
Boyton noted the board remains dedicated to its strategy of returning inflation to its target range while sustaining labour market gains. However, capacity pressures are proving to be more substantial than initially anticipated, with demand clearly outpacing supply. This economic imbalance presents a challenge for the RBA as it navigates its monetary policy.
This suggests that the RBA would need to observe a slowdown in economic activity and a moderation of inflation to keep the cash rate steady in May. Despite this, ANZ maintains its forecast that the cash rate will remain at 3.85 per cent through 2026, contingent on data softening in the coming months. Markets will be closely watching key economic indicators to gauge the RBA’s next move.
