RBA statement on monetary policy: Further easing could convey 'overly negative' view on economy

Author: Adam Button | Category: Central Banks

RBA statement on monetary policy highlights:


  • Board prepared to ease if needed
  • Holding rates in November allows time to 'assess effects'
  • December 2019 GDP lowered to 2.25% from 2.50%
  • December 2020 GDP forecast unchanged at +1.75%
  • Inflation forecasts unchanged
  • Mindful that rates very low and further cuts bring closer 'other policy options'
  • Financial markets appear to have passed a 'trough of pessimism'
  • Aussie economy is 'gradually coming out of a soft patch'
  • Lower rates support economy via a lower AUD, higher asset prices and boost to household incomes
  • Wage growth is low and 'no longer expected to pick up'
  • Forecasts wage price growth at annual rate of 2.3% out to 2021
  • Uncertain how quickly turnaround in house prices will feed into construction activity
The prior statement also lowered GDP estimates but the overarching theme continues to be a 'gentle turn' in the economy or at least a period of wait-and-see. The comments on wage growth argue that even if there is a turn, we won't be seeing a rate hike for a couple years.

The Australian dollar is about 5 pips lower on the headlines.

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