There wasn’t much new in the RBA Monetary Policy Board Minutes released today.

Just like the post-meeting communications, there was something for both the hawks and doves in the Minutes.

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The RBA Monetary Policy Board left the cash rate at 4.35% today as widely anticipated. The decision was unanimous.

There was something for both the hawks and doves in the Board’s statement.

On the hawkish side, the Board noted that inflation is still too high, likely to remain high for some time, and is “in addition to the high inflation recorded around the start of 2026”. To get inflation down the Board said that demand growth “needs to slow”. Notably, the Board said that it will increase the cash rate target further if required.

In contrast, the Board noted that there are signs that the economy - including consumer spending growth - is slowing as expected and “momentum in the housing market has shifted” amid tighter financial conditions. Moreover, the jump higher in the unemployment rate in April surprised the Bank, though today’s Statement noted that “other measures of labour market conditions have been more resilient”.

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• The RBA Board is likely to sit on the sidelines for at least several months.

• A 4.35% cash rate didn’t previously get the job done on inflation and our view has been that 1-2 more hikes would be necessary.

• Our conviction in that broader view has weakened amid heightened uncertainty on several fronts. Hiring tailwinds have also faded.

• It’s not clear, however, how much of the softening in activity indicators can be apportioned to higher interest rates or elevated uncertainty.

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RBNZ Governor Breman used her casting vote to maintain the OCR at 2.25% today. The 3 external MPC members all voted for a 25bp hike while the 3 Bank staff voted for a hold.

The disagreement was about the timing of policy tightening.

The Governor and the Monetary Policy Statement (MPS) made it clear that the MPC expects to increase the OCR at coming meetings.

The OCR track was lifted as expected and the policy rate is now projected to reach the 3% central estimate of long-run ‘neutral’ by early 2027. There are 3 more MPC meetings this year and an additional 2 meetings by March 2027.

The external MPC members seemingly sided with Prasanna Gai’s view - espoused recently here - that pre-emptive policy tightening is warranted when “a hub shock raises prices, coordinates beliefs, and may embed itself in the inflation process through the very act of firms trying to assess whether it will”.

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Communication from the RBA today all but confirms that the Board is in wait and see mode in the near term.

A cash rate change in June appears highly unlikely. The Board will be hoping for more clarity on the Middle East conflict by the 11 August Board meeting.

A bit restrictive

Today’s Board meeting Minutes reiterated - with the usual caveats - that the Board assesses the cash rate and broader financial conditions as now being “somewhat” restrictive.

“Having decided by majority to raise the cash rate target by 25 basis points, members considered what their deliberations implied for upcoming decisions. Members judged that, while it was still uncertain, financial conditions would probably be somewhat restrictive after this decision. They therefore agreed that the decision would give the Board space to see how the conflict in the Middle East develops and Australian households and businesses respond. They also agreed that any assessment of how the incoming data could change the outlook should acknowledge that monetary policy could not alter the near-term trajectory of inflation and, additionally, that output growth would likely be lower than potential growth for some time.”

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The RBA Monetary Policy Board raised the cash rate to 4.35% today as widely anticipated, including by us. The Board vote was split 8-1.

Governor Bullock noted in the press conference that the Board now assesses the cash rate as being “a bit restrictive”.

The Bank’s baseline underlying inflation forecasts - which assume that the conflict is resolved soon and fuel prices decline - were increased for the coming year. Nonetheless, the Board assessed that “the risks remain tilted to the upside”.

That’s hawkish.

But the Board is clearly also appropriately worried about the risk of adverse growth effects from a period of prolonged uncertainty and disruptions to commodity flows.

The Bank provided two scenarios along these lines which show even higher inflation and unemployment rate outcomes and weaker growth (than baseline outcomes). Importantly, however, those scenarios revolve around higher fuel prices and assume that Australia continues to receive enough imported fuel products to meet domestic demand.

The Board’s statement noted that “[h]aving raised the cash rate three times, monetary policy is well placed to respond to developments”. Governor Bullock noted in the press conference that that Board feels that policy settings now allow it to better assess both downside and upside risks to the outlook.

One interpretation of these comments is that the Board may currently be leaning towards sitting on the sidelines in the near term to see how the Middle East situation and economic data evolve.

A pause at the next Board meeting on 16 June, however, would mean that the next opportunity to change policy settings is 11 August, more than three months away.

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RBNZ Governor Breman’s speech this morning - Global shockwaves to Kiwi shores: The impact of the Iran conflict on New Zealand - pushed back against market pricing for the OCR.

Our view is that market participants have been getting way ahead of themselves is terms of the degree of OCR increases priced in for this year (up to +90bps).

The NZ economy has significant spare capacity and even though it has turned the corner, the adverse growth consequences of the Middle East conflict come at an inopportune time.

The Governor’s opening remarks said it all:

“…core inflation has been steady at 2.4 percent for some time. We are at the early stages of an economic recovery. Inflation expectations over the medium term remain well anchored, and wage growth is subdued.”

The starting point for underlying inflation - based on our quarterly seasonally adjusted measures - is low and broadly consistent with the mid-point of the 1-3% target.

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The RBA Monetary Policy Board raised the cash rate by 25bps to 4.10% today but it was a split vote of 5 members in favour and 4 opting for no change.

The last back-to-back rate hikes were in May/June 2023.

Markets initially interpreted the hike dovishly, with Aussie 3-year bond yields falling and AUD/USD depreciating a little.

Market pricing implied roughly a two-thirds chance of a hike today and most market economists flipped to a hike after Deputy Governor Hauser’s hawkish interview last week (see Don’t bet against the Hauser).

We were a bit more circumspect, noting clear arguments to hike (on domestic macro fundamentals) or hold (on conflict-related uncertainty).

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It is highly likely this was Deputy Governor Hauser’s plan all along in a seemingly last minute podcast interview and not long before today’s 2pm AEDT blackout kicked in.

We recently outlined our view about near-term monetary policy in Should I stay or should I go, with the key takeaways being:

Over overarching view is that monetary policy in Australia needs to be at least a bit tighter. Based purely on domestic factors and pre-conflict evidence of improving global economic activity, a back-to-back rate hike this month would be entirely defensible and sensible in our view. The current uncertain global backdrop, however, lends itself to waiting until May.

Hauser’s interview certainly tests our conclusion about the timing of the next rate hike.

Hauser’s interview got us thinking about the motivations behind it?

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The RBA Monetary Policy Board meets on 16-17 March.

Interest in this meeting has surged since Governor Bullock strayed this week from emphasising that the Board would likely take a “cautious” approach to saying that the March meeting will be “live” and the “Board will be actively looking at whether or not it needs to move more quickly”.

The Board papers are currently being drafted against a very uncertain global backdrop due to the Middle East conflict.

Who knows how long the conflict will last but the Board is likely to be provided with scenario analysis on different paths - including timeframes - for the conflict. It may be largely over by the time of the Board meeting, or it may not be.

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The RBA Monetary Policy Board raised the cash rate to 3.85% today as widely anticipated, including by us. The time between the last cut and today’s hike is 6 months which is within the range of timeframes seen in the past in Australia (see chart).

The decision was unanimous, including Treasury Secretary Wilkinson voting for the hike - a surprise to some commentators.

While no Australian government likes interest rates going up, with the next federal election due by mid-2028 we suspect the Government won’t make too much noise about today’s hike. It will hope that the macro backdrop remains sound and tighter policy takes care of higher inflation by 2028 given voter concerns about the cost of living. In the meantime we expect the Treasurer to continue to reference the “independent” RBA…

The Board’s statement, accompanying Statement and increases to the underlying inflation outlook are unequivocally hawkish.

Tellingly, the first key risk to the forecasts identified in the SMP is that the “central projection may place too much weight on the role of temporary factors in driving recent inflation outcomes”. In other words, the Bank is worried that capacity pressures may have been playing a larger role than assumed in the stronger inflation outcomes in H2 2025.

The pick-up in (private) demand growth over H2 2025 has been much faster than the Bank expected and - as the Governor and SMP noted today - the Bank/Board has underestimated the degree of excess demand in the economy. As a result, the labour market has been more resilient, and inflation higher, than expected.

Our summary: the Board got fed up waiting for inflation to return towards the mid-point of the target and is, for now, more worried about upside risks to the inflation outlook.

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The RBA Monetary Policy Board held the cash rate at 3.60% today as widely anticipated.

Markets were positioned for hawkish rhetoric, with around one-and-a-half 25bp cash rate hikes priced in over the next year or so.

Initial reactions in FX and fixed income markets suggest that markets expected more hawkishness than was delivered in the relatively short statement from the Board. (That was changing though as we go to print.)

But, it’s hawkish. No doubt about that.

A key phrase in the Board’s statement is in the first paragraph and reads:

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The RBA Monetary Policy Board held the cash rate at 3.60% today as widely anticipated.

The Board “remains cautious about the outlook given recent evidence of more persistent inflation in the economy”. This assessment is based on:

• stronger-than-expected Q3 inflation;

• an increase in some measures of capacity utilisation (including the NAB business survey measure); and

• continued elevated labour and non-labour cost growth in parts of the economy.

The SMP noted that “[w]hile part of the increase in underlying inflation is expected to be temporary, taken together with broader indicators of capacity utilisation in the economy, the data suggest there is a little more inflationary pressure in the economy than previously thought”. This point was re-iterated by the Governor at her press conference.

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The RBA Monetary Policy Board (MPB) left the cash rate at 3.60% today.

The stronger-than-expected detail underlying the monthly CPI indicator has certainly thrown a spanner in the works.

Comments from the Governor and the Board’s post-meeting statement (first paragraph!) made it clear that Q3 underlying inflation is highly likely to have been above the Bank’s expectation of a little more than +0.6% q/q in the August Statement.

As outlined in our preview (see here), we see Q3 trimmed mean inflation being significantly above the Bank’s SMP forecast.

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The RBNZ MPC lowered the OCR by 25bps today to 3.00% as widely expected, taking cumulative policy easing to 250bps.

The MPC turned very dovish, lowering the OCR track meaningfully since May alongside updated forecast profiles for a higher unemployment rate and wider output gap.

Two MPC members voted for a 50bp cut and four for a 25bp easing. The Committee also discussed holding the OCR at 3.25%, but didn’t vote on that option. Acting Governor Hawkesby noted that most of the ‘disagreement’ among Committee members was on the balance of risks around the baseline outlook.

The central projection for the OCR now bottoms at an average of 2.55% in Q1 2026, which is 30bps lower than assumed in May.

Our preview highlighted that “given the starting point for the unemployment rate and output gap, there is a relatively strong argument for the OCR track to be a little lower” than just being downgraded to meet market pricing. To be fair, however, the downward revision to the OCR track was larger than we had anticipated.

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The RBNZ MPC meets tomorrow and is widely expected to lower the OCR by 25bps to 3.00%, taking cumulative policy easing to 250bps.

Most of the focus therefore will be on any changes to the OCR track and tone of communications.

The May MPS OCR track bottomed at 2.85% in Q1 2026 whereas current market pricing hits around 2.75%.

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The RBA Monetary Policy Board (MPB) today cut the cash rate by 25bps to 3.60% as widely anticipated. The cash rate has now fallen 75bps from the peak.

As we expected, the Board remains cautious and measured in its assessment of the outlook. The Board reiterated that there is a “heightened level of uncertainty about both aggregate demand and potential supply”.

Scanning the Statement gives us the sense that the Bank remains a little uncomfortable about cost pressures bubbling underneath the surface in the Australian economy. The Bank has continued to lean on its forecasts for inflation and wages growth relative to those of its models.

“Our central forecasts for wages growth and inflation continue to incorporate some downward judgement to reflect the possibility that the economy and labour market are closer to balance than our models suggest.”

Staff forecasts contained in the Statement are conditioned on a cash assumption that is ~20bps lower than in May. The cash rate is assumed to settle around 3-3.1% so incorporate roughly two more 25bp cash rate cuts over time.

Key forecasts for the unemployment rate and underlying inflation are characterised in the Statement as unchanged from the baseline forecast in May.

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We expect that RBA Monetary Policy Board (MPB) to cut the cash rate 25bps to 3.60% next Tuesday. This is the consensus view and is fully priced by markets.

Following Q2 trimmed mean inflation printing close to the Bank’s May SMP forecasts - and below more up-to-date nowcasts - the Board is likely to form the view that inflation remains on track to reach the mid-point of the 2-3% target on a “sustainable” basis.

Observers are likely to have more interest in the outlook and we expect the Board to remain cautious and measured in its assessment of the current and expected state of the Australian economy.

Markets have fully priced another 25bp cut for the November MPB meeting and ~60bps of easing by the end of this year. Around 80bps of cumulative easing is priced in by mid-2026.

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The RBA Board went against market and (most) economist expectations and left the cash rate unchanged at 3.85% today.

Of the 9 Monetary Policy Board members, 3 did NOT vote for a hold (presumably voting for a cut). Our guess is that 2 of those dissenters were Iain Ross and Renée Fry-McKibbin. Did the new Treasury Secretary (Jenny Wilkinson) also dissent? Let the guessing games begin…

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Our base case has been that the RBA Board eases by 25bps in August and November, taking the cash rate to 3.35% by year-end. We now expect slightly faster policy easing amid signs that underlying inflation should prove no barrier and that hiring appetite appears to have waned.

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