Reply To: RBA Raises Rates Another 50bps to 1.85% as Expected


RBA July Minutes

Members agreed that further steps would need to be taken to normalise monetary conditions in Australia over the months ahead.
Members noted that gauging the level of the neutral rate is challenging in practice because it cannot be directly observed
Members considered the possibility of raising interest rates by 25 basis points or 50 basis points.
Level of interest rates was still very low for an economy with a tight labour market and facing a period of higher inflation.
Members discussed three points, first that current cash rate is well below the lower range of estimates for the nominal neutral rate
Members viewed it as important that inflation expectations remained well anchored and that the period of higher inflation be temporary.
This suggests that further increases in interest rate will be needed to return inflation to the target over time
Longer-term measures of inflation expectations were well anchored.
Neutral rate framework indicates that if inflation expectations rise, level of nominal interest rates required to return inflation to the target will be higher than otherwise
Inflation is forecast to peak later in 2022 and then decline back towards the 2 to 3 per cent range in 2023.
Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and