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Rates to remain low until ‘materially higher’ wages growth

 — 1 minute read

The RBA will refrain from lifting rates until wages growth is “materially higher” than it currently is.

Minutes from the Reserve Bank’s December policy meeting revealed that the bank has no intention of lifting rates until it sees stronger wages growth.

The RBA has, however, moved away from predicting when the rate hike would take place to discussing the conditions that would support such action.

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“The board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range,” the bank said.

“This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time and the board is prepared to be patient,” it reiterated.

The RBA did, however, confirm that it would make a decision about the bond purchase program at its first meeting in February.

The decision, it said, would depend on the criteria the board had previously agreed to  progress towards the board's goals for employment and inflation, the actions of other central banks and the functioning of the Australian bond market.

“Members noted that more information on these criteria would be available by the time of the February meeting.

“This included information on the December quarter CPI and how the labour market had performed over December and January.

“The risk to the recovery posed by the Omicron variant would also be more apparent by that time,” the RBA’s minutes read.

As for likely action, the RBA presented three scenarios, including the most likely option to reduce the pace of purchases from mid-February with an expectation of a likely end point in May.

The second option was to reduce the pace of purchases and review it again in May 2022, while the third option was to cease purchases altogether in mid-February.

Rates to remain low until ‘materially higher’ wages growth

The RBA will refrain from lifting rates until wages growth is “materially higher” than it currently is.

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Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.

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