Two women walk by the headquarters of the Reserve Bank of Australia in central Sydney, Australia February 6, 2018. REUTERS/Daniel Munoz

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SYDNEY, Feb 15 (Reuters) – Australia’s central bank is closer to hitting its economic targets than it has been in years, but is ready to exercise patience on policy as growth wages continue to slow even as inflation picks up.

Minutes of the Reserve Bank of Australia’s (RBA) February meeting released on Tuesday showed that its board was not yet convinced that the acceleration in inflation would be sustained and wanted to see wages react. before changing interest rates.

“The Board stands ready to be patient as it monitors developments in the various factors affecting inflation in Australia,” the minutes read.

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RBA Governor Philip Lowe said last week it was plausible that a rate hike could come later this year if the economy continued to beat expectations, a change from past forecasts that a move in 2022 was highly unlikely. Read more

Investors are betting on a rise as early as June given the rise in inflationary pressures around the world. Markets fully expect the spot rate from 0.1% to drop to 0.25% in June and 1.25% by Christmas.

The economy slowed in January as the rapid spread of the Omicron variant curbed consumer mobility, but spending has since recovered as cases stabilized.

The labor market remains tight with unemployment at a 13-year low of 4.2% and job vacancies at record highs.

Wage growth has picked up somewhat to 2.2%, but is still less than half the pace of the US or UK and policymakers would prefer to see it rise to 3.0% or more before withdrawing stimulus.

“After a long period of below-target inflation, the RBA seems keen to keep the economy running ‘warm’ for a while,” said HSBC Australia chief economist Paul Bloxham.

“In particular, the RBA wants to reset inflation and wage expectations so that wage increases of 3-4% become the norm, after many years of wage growth averaging 2%.”

He expects a first rate hike in the third quarter of this year, followed by another before the end of the year.

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Reporting by Wayne Cole; Editing by Muralikumar Anantharaman and Sam Holmes

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