RBA Policy Board Divided on Interest Rate Hike as Inflation Concerns Grow

The Reserve Bank of Australia's (RBA) policy board was divided on whether to raise interest rates at its August meeting, according to minutes released on Tuesday. Several members thought a hike might be necessary due to upside risks to inflation, but others felt the current cash rate of 4.35% was working to bring down inflation and that they could afford 'some time' to see how the economy evolved.

The board eventually decided to hold rates steady after debating the case for a fourth interest rate hike this year. The minutes cautioned that incoming data needed to show further progress on bringing inflation back within a reasonable timeframe. Several members judged it was quite possible that upside risks to inflation would crystallise, requiring some further tightening.

The RBA has identified several key risks, including the Middle East conflict and its impact on global oil prices, which have risen to $92 a barrel. The board also noted potential downside risks that could offset the upside risks, but ultimately decided to wait for more information before making a decision.