RBA Keeps Options Open for Another Rate Hike Amid Inflation Concerns

The Reserve Bank of Australia's (RBA) rate-setting board is still considering another interest rate hike to combat potential inflation risks. The RBA minutes from the August meeting revealed that members considered hiking rates to pre-emptively address upside risks to inflation, including a possible rise in conflict-related costs or an unexpectedly large AI boom.

The board also fretted over slower productivity growth and higher business cost pressures being passed on to consumers. Despite these concerns, the RBA decided to keep the cash rate unchanged at 4.35% due to lower-than-expected inflation and a softening jobs market.

ANZ senior rates strategist Jack Chambers described the minutes as 'slightly hawkish', with more emphasis on upside inflation risks and less focus on activity slowdown. However, he noted that the November meeting remains a risk for another rate hike, even if it's not their expectation.

The RBA is waiting for further data on inflation, labor market, GDP figures, and housing market downturn before making any decisions. The next important test will be July's inflation data ahead of the November meeting.