RBA Minutes - June 2011

The minutes of the RBA June 7 board meeting, released on Tuesday, show that interest rates will increase "at some point" but RBA says it will wait for more news on the state of the international economy and on Australia's domestic demand.

June 2011 minutes indicate a rate rise may not come as quickly as previously supposed:

Members considered, however, that the flow of data over the past month had not added any urgency to the need for an adjustment to policy.

Despite inflation being in the bottom half of the target range in underlying terms, gradual pick-up in inflation could be expected if the economy evolved in line with the Reserve Bank of Australia forecasts. That means RBA expects GDP growth would be somewhat above trend over the next few years, led by growth in the resources sector.

But the signs of a softer outlook, both locally and internationally, were enough to soften the RBA's line.

Domestic negatives included:

• weakening investment plans outside mining,
• caution among households,
• a weak housing market and a slowdown in employment growth from the rapid pace of late 2010.

International concerns included:

• the rising tide of uncertainty surrounding Greece's sovereign debt problems,
• its effect on share prices and foreign exchange market volatility, and
• a softening of momentum in the US economy, albeit against a background of still-strong growth in Asia.

Accordingly, members judged that the current monetary policy setting was appropriate and left official interest rates unchanged at 4.75%.