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.
