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RBA minutes flag higher neutral rate and oil-driven inflation risks

The minutes also said the AUD edged slightly lower after noting oil prices have exceeded expectations and house prices fell more than forecast.

Reported · Written up by our desk · Central Banks

The Reserve Bank of Australia published the minutes from its September monetary policy meeting, highlighting inflation upside risks that had already emerged or were unfolding since August, with members pointing to signals that financial conditions were only modestly restrictive, FXStreet reported.

The minutes cited potential tech-driven price pressures linked to an AI boom, as well as an intensified Middle East clash that pushed oil prices above expected levels. They also said an increase in the global neutral rate could weigh on the Australian dollar if Australian domestic rates stay flat, with models implying policy may be somewhat restrictive and that the neutral rate may have risen.

On the domestic front, the RBA noted house prices dropped more than expected, which it said could indicate financial conditions are quite tight. It also stressed that jobs data should be viewed cautiously due to survey changes, and that domestic spending must remain muted for a period to return inflation to target.

FXStreet said the Australian dollar edged slightly lower. The minutes added that overseas rate increases could ease domestic financial conditions through a drop in the Australian dollar, and cited widespread domestic cost pressures, including unit labour costs, as part of the inflation picture.

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