Risk rising of RBA speeding ticket: Goldman Sachs
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More news: The Reserve Bank's latest monetary policy minutes have been interpreted as having a "hawkish tone" by Goldman Sachs economists, who have warned it underscores the risk the economy is accelerating towards a speeding ticket from the central bank.
"In our base case the RBA holds the policy rate unchanged at 3.6% for the foreseeable future alongside evidence recent upside to inflation proves partly transitory and the medium term inflation outlook remains benign," they said in a note released on Tuesday afternoon.
"However, we stress that a rate hike as soon as February 2026 is a material risk, and is likely should inflation surprise to the upside again in November ... or December [data]".
Their note said there were “five key hawkish features” in the minutes. This includes the RBA’s greater confidence the labour market is still little tight, that the board is no longer confident financial conditions are restrictive, the risks to inflation are seen as being to the upside, the effect of the 2025 rate cuts is still largely to be felt next year, and the comfort of the board with the markets’ re-pricing in rate expectations.
The RBA meeting minutes specifically noted the markets moved from “pricing in a further 5 basis point cut in the cash rate by the end of 2026 to pricing in a 25 basis point increase” and this was directly in response to “both communication by the RBA and the release of data on inflation, the labour market and GDP”.
RBA board wary of inflation, discussed trigger for 2026 rate rise
The news: The Reserve Bank's monetary policy board has less confidence that monetary policy remains "a little restrictive" and remains concerned the data is suggesting inflationary pressures could be more persistent than previously thought.
But the latest RBA meeting minutes indicate a board that is taking a careful approach, warning "it was prudent to be cautious before extrapolating recent strength in inflation too far into the future".
The numbers: The Reserve Bank kept rates on hold at 3.6% when it met on 10 December. This followed a spike in the new monthly consumer price index, to 3.8% in the 12 months to October 2025.
The RBA has struck a cautious tone about the new monthly figures due to the difficulties in the seasonal adjustment process on a series without a deep history.
The context: Economists were largely in agreement that the central bank would keep rates on hold. Since the RBA met, several economists have shifted their predictions. Westpac analysts now expect rates to remain on hold in 2026, compared to a previous forecast for two cuts, with inflation remaining stubbornly higher than the 2-3% target range.
What they said: "Taken together, the incoming data had reduced their [the board members'] confidence in their earlier assessment that monetary policy was still a little restrictive," the minutes say, noting model-based estimates of the neutral cash rate imply the current rate is "around the average of the central estimate of its neutral level from the full suite of models maintained by RBA staff".
"Members expressed their concerns about the recent trend in inflation, the risk it could be more persistent than currently assessed and the potential for that persistence, if it crystallised, to contribute to an environment in which price increases are more readily accepted and households’ purchasing power comes under further pressure," the minutes say.
"Members discussed the circumstances in which, should these trends persist, an increase in the cash rate might need to be considered at some point in the coming year."
The source: Reserve Bank December meeting minutes
