RBA minutes point to stronger inflation risks behind February rate hike
The Reserve Bank of Australia’s February meeting minutes reveal a marked reassessment of inflation risks that prompted an unexpected rate hike. The board said risks are now “skewed to the upside,” highlighting three drivers: resilient services inflation, stronger-than-expected domestic demand (tight labour market and accelerating wage growth), and renewed international supply‑chain pressures lifting import prices. December-quarter data showed headline inflation at 4.2% and trimmed-mean (core) inflation at 3.8%, both above the RBA’s 2–3% target band; unemployment was 3.9% and Wage Price Index rose 4.1%. Markets reacted quickly: Australian government bond yields rose ~15 basis points, AUD/USD gained ~0.8%, financials fell ~1.2%, and markets priced additional tightening. The minutes stress data-dependent policy and flexibility but reaffirm the 2–3% inflation target. For traders: watch upcoming CPI, wage and employment prints, RBA communications, and global central bank moves—these will drive short-term AUD direction, bond yields and risk sentiment. Primary keywords: RBA minutes, inflation risks, rate hike, AUD, bond yields. Secondary/semantic keywords included: core inflation, wage growth, monetary policy, CPI, central bank guidance.
Bearish
An RBA surprise rate hike and an explicit shift to viewing inflation risks as “skewed to the upside” is generally bearish for risk assets and supportive of a stronger AUD and higher bond yields. Short-term: expect AUD appreciation, rising Australian government yields and pressure on equity sectors sensitive to rates (banks may be volatile; rate hikes can narrow lending margins initially but lift deposit costs). Crypto markets, which often move with global risk sentiment and USD/interest rate drivers, could see increased volatility and downward pressure in the near term as investors reprice rate paths and reduce exposure to risk-on assets. Historically (e.g., Fed tightening surprises), such shifts lead to short-term risk-off moves and tighter liquidity, hitting higher-beta assets including many cryptocurrencies. Long-term: if RBA tightness succeeds in re-anchoring inflation expectations and leads to a clear slowdown in inflation, markets may stabilize and risk assets can recover. Traders should monitor CPI, wage prints, RBA forward guidance and global central bank actions; use yield and AUD moves as leading indicators for crypto and equity risk appetite.