Board agreed some further tightening may be required, would reconsider at August meeting

The Reserve Bank of Australia (RBA) published the Minutes of its July monetary policy meeting on Tuesday, highlighting that the “board agreed some further tightening may be required,” adding that “they would reconsider at August meeting.”

Additional takeaways

Board considered holding rates steady or hiking by 25 bps.

Strong case for both, but board judged arguments for holding steady were stronger.

Board agreed some further tightening may be required, would reconsider at august meeting.

Current stance of monetary policy was “clearly restrictive”, and would become more so.

Board discussed risks economy, consumption could slow more than expected.

Noted squeeze on household finances, risk unemployment could rise more than needed.

Board noted inverted yield curve pointed to tighter conditions, slowing growth.

Also risks with waiting too long for inflation to return to target.

Inflation proving sticky in other countries, australian rates still lower than many others.

Labour market very tight, weak productivity adding to labour costs.

While domestic inflation had eased, service inflation still high along with rents, energy, food.

Annual wage growth seen rising to 4% in Q3, following fair work award.

Economy had slowed considerably, Q2 gdp growth seen around +0.2% QoQ.

Consumer spending seen weak in Q2, rebound in housing market to support consumption.

Market reaction

On the Minutes release, AUD/USD is holding onto its renewed upside, currently trading at 0.6830, up 0.21% on the day.