RBA minutes at the Mrach meeting revealed a clear bias toward further near-term tightening, as policymakers judged that inflation remains too high and risks have increased following the recent surge in oil prices. Members noted that “inflation remained too high” and that the economy was still operating with “excess demand”, with labour market conditions tightening slightly further beyond levels consistent with full employment.
A key shift in the discussion was the impact of the Middle East conflict on inflation dynamics. Members agreed that the rise in oil prices would “increase inflation significantly in March,” while also acknowledging that higher energy costs would likely weigh on activity. However, they emphasized that monetary policy cannot offset the initial price shock, but must act to prevent it from becoming entrenched. In particular, tighter policy could “reduce the extent to which higher costs would be passed on to final prices.”
This underpinned the case for further tightening, with members agreeing that “further tightening in monetary policy would likely be required in the near term” and that it was “not clear that [financial conditions] were sufficiently restrictive.” The persistence of excess demand, combined with rising short-term inflation expectations, strengthened the argument for acting sooner rather than later.
At the same time, the Board acknowledged significant uncertainty, particularly around the evolution of the Middle East conflict and its implications for growth. Some members argued for holding rates steady to gather more information, citing risks that consumption could weaken and that labour market tightness may ease. However, the majority concluded that the upside risks to inflation warranted action, while emphasizing that future policy decisions would remain data-dependent.
RBA raised interest rate by 25bps to 4.10%, with 5-4 vote, at that meeting.
