The Reserve Bank of Australia released its monthly meeting minutes for the monetary policy held earlier in July. The markets did not react much to the minutes which were seen as being largely positive.
Two weeks after the RBA left interest rates unchanged, the Australian Central bank released its meeting minutes earlier today. The bank concluded that it would assess further economic data before deciding whether to cut interest rates further.
On the domestic front, the RBA noted that activity in the non-mining sectors of the economy remained subdued but were offset by the services and housing investment and construction sector. The bank’s main concern has been that of reigning in housing sector and is therefore aptly worried about the consequences of further rate cuts which could fuel demand in the Australian housing sector. The Central bank was seen to count on the efforts from housing regulators in a bid to clamp down on property price inflation in cities such as Sydney and Melbourne. The Central Bank along with the housing market regulator, the Australian Prudential Regulation Authority or ARPA tightened restrictions on lending to investors in the housing sector.
On the exchange rate, the RBA noted that the lower exchange rate of the Aussie was helping the export sector and the bank was currently monitoring signs of a pickup in the export sectors that were not affected by the downturn in the mining and mining investment related sectors.
The RBA’s minutes showed that the quarterly inflation data in June was broadly in line with expectations based on domestic inflationary pressures and one which was well contained. The quarterly CPI increased 0.8% in June and 1.5% for the year. As a result, the RBA’s members felt that the spare capacity in the labour markets and the subdued growth of labour costs were reflected by the low inflation in the markets. On the GDP growth, the board expects to see a lower than forecast growth in the GDP for the next few years largely due to a downward revision in population growth and thus lower consumption and the fall in the non-mining investments.
On the global markets, the Central Bank was of the view that the US Federal Reserve could begin tightening the monetary policy as early as September but also acknowledged that the financial markets were only pricing in a Fed rate hike in September. The RBA noted that there could be a significant impact on the markets when the Fed will hike rates, despite the well communicated change in policy. The bank expects to see the US Dollar strengthen further in light of the potential tightening to the Fed funds rate.
The Aussie initially surged to post a session high near 0.7386 before easing from the highs to trade lower for the day, down -0.17% but remains supported above yesterday’s lows posted near 0.7343. The minutes failed to offer any significant impact during the Asian trading session especially in light of the recent Yuan devaluation, which is expected to be addressed during the next policy meeting.
Australian Economic Data at a Glance
| GDP y/y | GDP q/q | Inflation Rate | Unemployment Rate | RBA Interest Rate |
| 2.3% | 0.9% | 1.5% | 6.3% | 2% |
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