The Reserve Bank of Australia will consider global and domestic developments before deciding on an additional interest rate cut.

This is according to the minutes of the central bank’s meeting held earlier this month that were released on Tuesday, which shows the bank will contemplate additional rate cuts to bolster growth and achieve its inflation target of between 2-3%.

The minutes stated: “Members would assess developments in both the international and domestic economies, including labour market conditions, and would ease monetary policy further if needed.”

The Reserve Bank of Australia (RBA) slashed rates back in June, its first easing in nearly three years, and then again in July.

Earlier in September, the RBA left rates at record lows of 1%, echoing its forward guidance saying, “it was reasonable to expect an extended period of low interest rates in Australia.”

According to a Reuters report, financial markets have fully priced in another rate reduction to 0.75% by the end of the year and to 0.5% by early next year.

“The minutes make a fairly clear case for another rate cut in 2019,” Westpac chief economist Bill Evans stated.
The minutes also revealed RBA board members were worried about the mounting trade war between the U.S. and China which threatens global growth.

On home soil, labour market space capacity was discussed, with the minutes stating the country could sustain lower levels of unemployment and underemployment.

Furthermore, in regard to wages, the RBA said the “upward trend in wages growth appeared to have stalled.”
RBC economist Su-lin Ong commented: “The RBA’s September board minutes confirmed a clear easing bias. The more dovish tinge was evident throughout the entire set of minutes.”

In contrast, the housing market is experiencing a turnaround with a rise in mortgage approvals and auction clearance rates.

The minutes said: “Members recognised that this could sow the seeds of an upswing in the housing price cycle at some point, particularly given the lengthy stages in the construction of higher-density residential housing.”

 

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