Reserve Bank of Australia meeting minutes: Upward risks to inflation remain, further rate hikes may be necessary if needed

(1) The Reserve Bank of Australia believes that after the September rate hike, inflation risks remain elevated. Due to excess domestic demand and rising global energy costs, inflation may prove more stubborn than expected, and the possibility of a fifth rate hike this year still exists. (2) Meeting minutes show that the Board only "briefly" considered leaving rates unchanged before unanimously voting to raise rates by 25 basis points to 4.6%. Reasons cited include stronger-than-expected economic demand, Middle East conflict driving up oil prices, persistent domestic cost pressures, and rising unit labor costs. (3) The Board considers the current financial environment restrictive but not severely so and sees the need to adjust rates "in a timely manner" to stabilize inflation expectations. If rates are left on hold while other countries tighten policy, the Australian dollar's depreciation could actually ease domestic financial conditions. (4) The Board remains focused on price stability and full employment, and will continue to take necessary measures, including further raising the cash rate if needed. There are fewer arguments supporting holding rates steady, including falling house prices and the possibility that Middle East conflict may dampen demand. (5) Other points of concern: the neutral rate may have risen; the AI boom is weighing on Australian tech stocks; employment data should be interpreted cautiously due to changes in survey methodology; house price declines exceed expectations, suggesting financial conditions could be quite tight. (6) Markets indicate a 30% chance the Reserve Bank of Australia will raise rates to 4.85% at its November 3-4 meeting, rising to 50% in December, and a rate hike by May next year is already fully priced in. The Board also approved the establishment of a regular repo operation, which will be operational by 2027.