RBA minutes: Neutral nominal rate stands at 3.5%

The minutes of the July RBA meeting when interest rates were held unchanged at 1.5% have been released, highlighting that the Central Bank now estimates neutral real rate had fallen to around 1%, while neutral nominal rate stands at 3.5%.

As the RBA minutes note: "Taking into account all the available information, the Board judged that holding the accommodative stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time."

Key headlines

Judged steady policy stance consistent with growth, inflation targets

Saw welcome improvement in world economy, number of central banks more positive

Domestic labour, housing markets continued to warrant careful monitoring

Repeats a rising a$ would complicate economic rebalancing

Australian economic data for q2 had generally been positive

Data suggest gdp growth increased in q2, household consumption picked up

Jobs data positive, provided further confirmation of improvement in labour market

Recent rise in employment to support household incomes, spending

Underemployment still elevated, wage pressures subdued

Fiscal policy to be more expansionary in 2017/18 than previously expected

Stronger infrastructure spending to have significant positive spillovers to economy

Too early for tighter lending rules to have full effect on housing market

Estimates neutral real rate had fallen to around 1 pct, neutral nominal rate at 3.5 pct


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