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Australia's central bank thought it was prudent to gradually raise interest rates over time given an improving local economy, but the pace of tightening was an open question, minutes from the central bank showed.
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When the Reserve Bank of Australia (RBA) raised interest rates by 25 basis points to 3.50 percent in November, it had sought to balance the risks of choking off an economic recovery by tightening too fast, against leaving rates too low for too long which had its own risks, minutes from the November meeting showed.
Looking ahead, members expected that if economic conditions evolved as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question, the minutes showed.
The minutes, which are scrutinised by investors for clues about the RBA's next policy move, will keep alive speculation about whether the bank will again raise rates in December by 25 basis points.
A robust local labour report this month fuelled talk that a December rate hike was on the cards.
But the RBA's tentative tone in Tuesday's minutes about the pace of tightening suggests the chance that rates will be steady in December cannot be ruled out.
Underscoring its recent bullish remarks about the sturdy Australian economy, RBA board members noted at the November policy meeting that there was less idle capacity in the local
economy than had earlier thought.
The growth outlook over the next few years had also improved. The minutes showed that RBA board members took special note of the fact that economic growth in major trading partners are expected to be around trend next year.
China is the top buyer of Australian exports and its solid demand for Australian commodities had saved the nation from a recession during the financial crisis. On inflation, the RBA noted its preferred measure of underlying inflation was gradually easing and will continue to do so next
year, as expected, to be within its target band of 2-3 percent.
However, members noted the latest inflation forecasts still represented an upward revision from
earlier predictions.
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Data is a real-time snapshot *Data is delayed at least 15 minutes