RBA says rate hike is a certainty, hints of inflation concern
The policy rates will definitely move up and it's only a matter of time as far as the Reserve Bank of Australia (RBA) is concerned, as shown by the Tuesday release of the central bank's October 5 board meeting minutes.
It may have opted for a new round of pause in the October cash rate but the RBA made clear that a hike would be inevitable and it would happen much sooner as the board meeting sent loud signals that the bank would not be willing to wait for further data when it meets again next month.
The RBA said that the interest rate was maintained at its current level of 4.5 percent to encourage further growth as it cited that the prevailing weak movement of credit growth and a strengthening Australian dollar could conspire in restricting a more relaxed monetary environment.
While the bank conceded that global outlook still emits uncertainty, its surprise move to defer an upward movement on the cash rate was made basing on a 'finely balanced' considerations as the board hinted that any increases in the coming months would be a 'matter of judgement' by the RBA.
If only to avert an inflation due to the country's dwindling resources, the board meeting minutes signified that a rate hike would be necessary yet for now, the RBA said that it has the required flexibility to move for a stay on any rates movement.
By its next meeting, the RBA board maintained that a rate hike could be a possibility, a decision it said would be largely influenced by more available data on the country's third quarter inflation level, which the central bank said would climb by a maximum of three percent over the next 18 months.
Also, the Australian dollar's ascent to parity would be factored in by the RBA on its November board meeting as the October minutes took note of the fact that the local economy is fast-evolving though a much-tempered consumer spending led to a firm movement in demand.
The RBA noted that while fresh investments were made in the year, the impact of such business activities should take a while to trickle down and patch the gaping holes currently seen in the economy.