Financial markets,which until recently had expected the bank to take the official cash rate to 4.1 per cent by the middle of this year,now believe it may have to start cutting by July.
The RBA has lifted the cash rate at its past 10 consecutive meetings,from 0.1 per cent in early May to an11-year high of 3.6 per cent. On a $604,000 mortgage,the increases have lifted monthly repayments by more than $1100.
The minutes of this month’s meeting,held before America’sSilicon Valley Bank collapsed andEurope’s Credit Suisse was hit by client outflows and a stock rout,showed concern about the impact of such a rapid tightening of monetary policy.
“Members agreed to reconsider the case for a pause at the following meeting,recognising that pausing would allow additional time to reassess the outlook for the economy,” they said.
“At what point it will be appropriate to pause will be determined by the data and the board’s assessment of the outlook.”
The bank is forecasting inflation,which hit a 32-year high of 7.8 per cent in December,to gradually fall back to 2.5 per cent by the middle of 2025. That forecast is predicated on further increases in interest rates.