The Reserve Bank of Australia (RBA) made a "finely balanced" decision to increase interest rates in June due to concerns that high inflation could become entrenched in wage and price expectations.
The RBA board considered holding rates steady due to slowing consumer spending, but ultimately decided that the risks to inflation were too great to ignore. The cash rate was raised by a quarter point to 4.1%, surprising some in the financial markets who had expected a pause in rate hikes.
The minutes of the meeting also highlighted concerns over rising electricity prices, high rents, stubborn services inflation, and a rebound in national house prices.
The board noted that low productivity and rising wages were a particular worry, as well as the potential for wage and price indexing to past high inflation. The RBA's target band for inflation is 2-3%.
