Australia’s central bank stuck with smaller gains as wary of falling house prices According to Reuters

Australia’s central bank is expected to raise interest rates further in the near-term but stuck with smaller hikes this month in part due to concerns that falling housing prices will hit consumer spending and the value of consistent action.

Minutes of the November 1 policy meeting released on Tuesday showed that the Reserve Bank of Australia (RBA) Governing Board was once again considering a 25 basis point or 50 basis point increase to bring inflation back to the table. bounce back to the 2-3% target range, but the argument for a smaller upside prevails.

The RBA Board noted that interest rates have risen 275 basis points since May to a nine-year high of 2.85%, and much of that has yet to be translated into mortgage payments.

While consumption has remained flat so far, the tightening has affected housing prices, the bank said, which in previous experience is likely to have a major impact on consumer spending, according to the bank. Bank.

Other arguments for less increase include still-weak wage growth, some loosening of global supply chain issues, falling commodity prices and the impact of a synchronized global tightening that eases pressure inflation in the coming period.

“The Board agreed that consistent action would support confidence in the monthly policy framework among financial market participants and the general public,” the minutes said.

However, the Council, determined to bring inflation back to its target, does not rule out the possibility of a return to larger increases if the situation allows, and conversely, it is willing to keep rates unchanged for a while. while accessing the state of the economy if needed.

“Interest rates are not on a set path,” the minutes showed.

The central bank notes that the risk to the inflation outlook is the possibility that wage and price setting behavior will change, with wage growth likely to accelerate further as unemployment hovers around lows in nearly 50 years.

Australia will report wage growth figures for the third quarter on Wednesday, with analysts predicting wages could rise 3 per cent from a year ago, up from 2.6 per cent in the previous quarter, as the minimum wage increases.

Markets are looking for a quarter point increase at the next policy meeting in December, but imply about a 25% chance the RBA can hold steady. Rates are seen peaking at around 3.7% the following July.

The Council is also expected to raise interest rates further in the near term in an attempt to establish a more sustainable supply and demand balance in the Australian economy.

RBA Deputy Governor Michele Bullock said on Thursday that they may be getting close to a “wait-and-see” rate hike, but more evidence is needed that demand is slowing as it should.