The RBA minutes for their last meeting were released yesterday. As usual the concluding paragraphs, below, illustrate their thinking. Note the bold green text were it confirms they will continue lifting to 'normal' levels which are likely to be between 4.50% and 5.00%
Members took note of the positive developments in the financial sector, including early signs that credit to business was becoming easier after the difficult period last year. They also noted that, while housing loan approvals had slowed a little, house prices had gained significant momentum and were continuing to rise strongly for all but the bottom segment of the market.
Members agreed that the fiscal problems in Europe, if not resolved satisfactorily, could result in renewed turmoil in markets and fresh weakness in the global economy, which could have implications for Australia. But while such an outcome could not be ruled out, it was not the most likely one. The central expectation remained that the global expansion would continue at a reasonable pace with significant regional differences. Members concurred that the appropriate course was to set policy as required by the most likely outcome, and to be ready to respond to other outcomes if they eventuated.
On balance, members concluded that the evidence that had become available recently had confirmed that it remained appropriate for interest rates to move gradually towards normal levels, and that it was timely to take another step in that direction.
The Decision
The Board decided to raise the cash rate by 0.25 percentage points to 4.0 per cent, effective 3 March.
