RBA Minutes from the August meeting stated board is ready to increase rates if upside risks materialise and several members judged it is possible upside risks to inflation would crystallise, others saw offsetting downside risks and time to assess data

Says: Several members judged that it was quite possible that the upside risks to the inflation forecast would crystallise, requiring some further tightening. Other members noted the potential for downside risks to offset them. Following the increases in the cash target earlier in the year, monetary policy appeared sufficiently restrictive to bring inflation back to target within a reasonable timeframe, and that there was still some time to assess the accuracy of that judgement. Members considered whether to raise the cash rate target by 25bps at the meeting or to leave it unchanged for the time being. Members noted that one argument in support of the current setting of monetary policy already being sufficiently restrictive was that the data received since the previous meeting had signalled that the economy was moving steadily towards the inflation and full employment objectives. It was acknowledged that inflationary pressures might turn out somewhat stronger than this central case if some of the upside risks crystallised. However, this was judged to be uncertain and the near-term evolution of the economy afforded some time to leave monetary policy unchanged while assessing what incoming data reveal about these risks. Another reason to leave the cash rate target unchanged at this meeting was that members might judge the risks around the inflation forecast to be balanced rather than tilted to the upside. Staff research findings imply that a more pre-emptive approach to monetary policy might be appropriate when the economy is subject to capacity constraints and adverse supply shocks. Members acknowledged that the global cost shock generated by the conflict in the Middle East meant some spare capacity may be necessary to bring inflation back to target.