Reserve Bank of Australia Board Meeting Minutes: May 2024

Highlights:

• Global Economic Stability and Inflation Concerns: The RBA board discussed global economic conditions, noting balanced risks but persistent high inflation, particularly in core services, posing challenges for advanced economies.
• Domestic Economic Trends and Labour Market Resilience: In Australia, consumer spending remained weak, but household incomes stabilized. Business investment grew robustly, and the labor market showed resilience with unemployment rates only modestly higher than late-2022 levels.
• Monetary Policy Decision: The RBA decided to keep the cash rate unchanged at 4.35%, emphasizing a balanced approach to returning inflation to target while supporting gradual adjustments in the labor market amidst ongoing economic uncertainties.

The Reserve Bank of Australia's (RBA) board convened to discuss the current economic landscape and monetary policy.

International Economic Conditions

The board noted that global economic risks had balanced recently, with mixed growth trends in advanced economies. While the US showed robust growth, other advanced economies exhibited weaker performance. Inflation remained high, with persistent core services price inflation posing a challenge to lowering inflation rates.

China's Growth and Commodity Prices

China's economic growth picked up, targeting around 5% for 2024, driven by a rise in net exports. However, the property market remained weak, necessitating policy support. Commodity prices, including iron ore and coking coal, increased due to China's stronger economic outlook and supply constraints.

Domestic Economic Conditions

Consumer spending in Australia remained weaker than expected in early 2024. Despite higher household disposable income, saving rates increased. Business investment and public sector spending grew strongly, with significant contributions from non-residential construction and investment in intangibles.

Labour Market and Inflation

The labor market showed resilience, with unemployment rates modestly above late-2022 levels. Inflation eased in March but remained above target, driven by high domestic cost pressures. Goods price inflation eased, but services price inflation stayed high.

Financial Conditions

Expectations for central bank policy rates rose, particularly in the US and Australia, pushing sovereign bond yields higher. The Australian dollar appreciated slightly, influenced by commodity prices and yield differentials.

Monetary Policy Decision

The board decided to keep the cash rate target unchanged at 4.35%. They emphasized the importance of returning inflation to target within a reasonable timeframe while supporting gradual labor market adjustments. The board acknowledged the increased risks of prolonged inflation but deemed the current path of monetary policy appropriate given the balanced risks and credible forecasts for inflation returning to target.

The board reiterated its commitment to monitoring economic developments and adjusting policy as necessary to achieve its inflation and employment objectives.

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