RBA: Keeping still to avoid rocking the boat - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital points out that in the final discussion on monetary policy, the RBA board did say that “faster growth in business investment was expected”, somewhat at odds with other areas of commentary, but it also said the overall growth outlook was little changed.

Key Quotes

“It appears that the outlook for growth and inflation was little changed, in part because the stronger exchange rate since May had offset the improvement in business conditions and the labour market.”

“But the RBA was discouraging further strength in the currency, implying that it was on the cusp of dampening forecasts.  It said that, “a further appreciation of the exchange rate would be expected to result in a slower pick-up in inflation and economic activity than currently forecast.”  Repeating the wording used in the policy statement and SoMP.”

“Housing and household debt remain key areas of policy concern, given higher attention and weight in all RBA statements, more so since RBA Governor Lowe took the helm about a year ago.”

“Like China, this is colouring the RBA’s forecast for growth more darkly than the current trends in the economic data.  It remains a factor that is both restraining the RBA from raising and cutting rates.  The RBA is pleased that macroprudential measures have been added since last year and continues to monitor their impacts.”

“At this stage, overall credit growth is relatively stable and there is some evidence of moderation in the big city housing markets. The RBA is arguably sitting calmly trying not to rock the household debt boat.”