The Reserve Bank of Australia’s policy board was divided over whether to raise interest rates at its August meeting, minutes released on Tuesday showed, with several members arguing that a hike to 4.6% may have been warranted to counter upside inflation risks.
The nine-member board ultimately agreed to maintain the cash rate at 4.35%, a decision made unanimously after weighing the balance between inflation control and economic momentum. While some members emphasized the need for pre-emptive action, others favored maintaining the current stance to allow incoming data to clarify the inflation outlook.
Market pricing ahead of the September 28-29 policy meeting reflects a slim 13% probability of a rate increase, according to swaps data. By February 2025, however, traders have priced in roughly a 67% chance of another move. The board’s decision to hold followed signs of cooling inflation, a slight rise in unemployment and a softening housing market.
External risks cited included geopolitical tensions in the Middle East, particularly the potential disruption to oil flows through the Strait of Hormuz, alongside the global surge in AI and data center investments and persistent productivity challenges. Brent crude futures were last trading near $92 a barrel, having earlier in July dipped to $70.14.
The RBA’s forward guidance emphasized that future decisions would depend on incoming information, as the board seeks to balance inflation risks against broader economic conditions. The U.S. also took action on Monday, announcing expanded sanctions targeting Iran’s economic infrastructure.
