RBA emphasises the importance of house prices - Westpac
Bill Evans, analyst at Westpac, notes that the RBA Board minutes confirmed the current neutral policy bias and the commentary on the importance of house prices was of most interest.
Key Quotes
“The policy outlook is firmly linked to progress in reducing the unemployment rate and moving the inflation rate back into the 2-3% policy band.”
“The risks around the outlook centre on the household sector and dwelling investment. The Bank remains generally comfortable with the outlook for business investment ; government spending and external conditions.”
“The Bank’s current position that the effect of recent price falls on overall economic activity was expected to be relatively small is noted. However, in a very significant warning around the policy outlook, the minutes state “if prices were to fall much further, consumption could be weaker than forecast, which would result in lower GDP growth, higher unemployment and lower inflation than forecast”. This statement directly links developments in house prices to the Bank’s key policy forecasts.”
“The minutes note that financial market pricing implied that the Australian cash rate was expected to remain unchanged for a considerable period with some expectation of a decrease by late 2019.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
