RBA Minutes - May 2011

May 17, 2011 - Boris Chan

The Minutes from the RBA's May 2011 meeting show the Reserve Bank believes the current stance on monetary policy is appropriate. However most economists believe RBA will raise official cash rate at the next meeting in June.

The biggest concern for RBA is inflation which had been higher than expected and has a trend to increase further. Mining and resource sectors keep driving inflation up and despite other sectors in Australia strugling RBA believes that monetary policy had to be set for the needs of the overall economy:

In this respect, members judged that if economic conditions continued to evolve as expected, higher interest rates were likely to be required at some point if inflation was to remain consistent with the medium-term target.

It's worth to mention that RBA Minutes of October 2010 had the same sentence in it and in the next meeting (in November) RBA raised rates by 0.25%. Some see the same parallels here as well.

And while RBA is continuing to weigh up the balance between Australia's mining boom, weak household spending and continuing international financial problems, the most likely outcome of the next RBA meeting - interest rates will go up.

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