The RBA board considered raising rates to 3.85 per cent, amid concerns inflation may increase due to strong population growth and large public sector wage rises.
, caused traders to dramatically reassess the probability of further tightening, amid signs the financial sector was buckling under the pressure of higher borrowing costs.The minutes show the RBA board considered, but opted against, lifting interest rates by 0.25 percentage points to 3.85 per cent in April, as it battles to bring inflation down from 7.8 per cent to its 2 to 3 per cent target band.
Electricity prices are forecast to “increase sharply” in the September quarter, with default contract prices to jump by 20 to 30 per cent, adding 0.25 percentage points to inflation next financial year.With Treasury forecasting a net influx of 650,000 migrants between this financial year and next financial year, the central bank is also worried that high rates of population growth could put further upward pressure on inflation.
Another argument in favour of the 0.25 percentage point increase was the increased risk of larger wage rises across the economy later this year, including in the public sector.Dr Lowe has previously said aggregate wages growth would need to remain under 4 per cent to avoid stoking above-target rates of inflation, based on historical rates of productivity growth.
The gains meant the jobless rate held steady at a near-five-decade low of 3.5 per cent, while there are now almost 900,000 more people in work than at the onset of the pandemic.
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