Reserve Bank considered hike at December meeting

The news: The Reserve Bank considered hiking the cash rate an extra 25 basis points at its December meeting over risks of a prolonged high inflationary period, RBA minutes show. The central bank determined it was better to wait for further data, and noted the possibility of a larger than anticipated rise in the unemployment rate.

The numbers: A 25 basis point rate hike would have put the cash rate at 4.6%, up from its current level of 4.35%.

The context: RBA members noted overseas headline and core inflation figures had been more encouraging over November, although services inflation was easing more slowly than other measures. Retail sales and industrial production growth in China had been encouraging, but the crisis in the property sector was still a concern. Back at home, tight rental markets, particularly in capital cities, were likely to be an ongoing source of inflationary pressure "for some time", the RBA said. Wage price growth had reached 4% earlier than expected, but the RBA believed it was unlikely to rise much further. Members also observed Australian labour market conditions remained tight.