RBA minutes - September 2010

Interest rates rise is coming - minutes from the Reserve Bank's September 7, 2010 meeting show.

Australian economy is performing better than expected and it seems only risks of a major downturn in the US or slower than anticipated growth in resource hungry China, forced the board to leave the rate on hold in September.

However RBA is increasingly concerned about rising potential for a sharp kick up in inflation if the resources boom and rising domestic consumption set off a surge in demand for labour and materials and services.

Members observed that previous investment booms and increases in the terms of trade had posed significant challenges for economic policy, and that high levels of resource utilisation were likely to put pressure on inflation.

So the rate rise is near. The main question is when - October or November meeting?

While policy had to be alert to these risks, members considered that if the central scenario came to pass it was likely that higher interest rates would be required, at some point, to ensure that inflation remained consistent with the medium-term target. 

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