Interest rates, inflation: October RBA minutes show Michele Bullock considered rate hike

A jump in global oil prices risks worsening the cost of living crunch and derailing the Reserve Bank’s current path to bring inflation to a heel, forcing another rate rise, meeting minutes reveal.

The threat of persistent price pressures led the RBA to consider a further 25 basis point hike to interest rates, bringing the official cash rate to 4.35 per cent, when the bank’s board met earlier this month for the first time with governor Michele Bullock in the top job.

While inflation has broadly trended lower since its peak in December last year, RBA board members said the recent uptick in petrol prices would continue to “underpin inflation over coming months” and could “influence households’ inflation expectations”, according to the minutes of its October 3 board meeting.

Despite renewed cost pressures at the bowser, the central bank ultimately chose to keep rates on hold at 4.1 per cent for the fourth consecutive month in October, stating that the delayed impact of its interest rate increases would not be fully evident for some months.

Amid warnings oil prices could surge past $100 a barrel, the RBA said oil prices were almost 30 per cent higher than at the end of June and had pushed up inflation.

“Rising energy prices had seen headline inflation pick up in a number of countries over the prior couple of months, including in Australia,” the minutes read.

More price pain at the bowser means the process of getting inflation, currently at 5.2 per cent, to return to the central bank’s 2 to 3 per cent target band could be more difficult.

Indeed, the RBA noted that it had a “low tolerance for a slower return of inflation to target than currently expected” and was open to a further rate rise should inflation prove more persistent than expected.

Oil prices wobbled on Monday, initially surging above $US91 a barrel amid renewed fears of an escalation in the Israel-Hamas war, before dropping back below $US90 after reports that the US was nearing a deal to ease sanctions on Venezuela.

An increase in petrol refinery margins following production disruptions in some markets had also added to soaring costs at the bowser, the minutes said.

Across the country, average unleaded petrol prices now sit at 204.1 cents per litre.

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