RBA concerned on trade uncertainty, drought conditions: Meeting Minutes

0 5

The Australian central bank released its meeting minutes last week. As widely expected, the minutes did not reveal any new information for the market participants.

The Reserve Bank of Australia reiterated that it had no plans to adjust the monetary policy in the near term. The meeting minutes covering the August RBA meeting was released on Tuesday.

Act_TradeIdeas

The meeting minutes showed potential risks that the central bank was watching. These included the risks from global trade tensions and the economic impact from the drought that hit the rural parts of Australia.

The meeting minutes for August showed that the RBA would continue its current stance to support the economic growth. The minutes said that policymakers did not see any strong case for a near-term adjustment to interest rates.

The Reserve Bank of Australia has held interest rates steady at 1.50% since August 2016. The meeting from August marked two years since the central bank made any changes.

The minutes showed that according to policymakers, the central bank forecasts the unemployment rate to remain around five percent by the end of 2020. Latest jobs report put the Australian unemployment rate at 5.4% in July.

Wage growth remained subdued during the period. But central bank officials remain optimistic that wages will rise gradually as spare capacity falls. The inflation rate is expected to rise to 2.25% by 2020.

Overall, the meeting minutes from the RBA did not signal any change to the language or the tone. Instead, the meeting minutes were seen supporting evidence that the central bank was slowly gaining more confidence in the economy. This was seen from its rather optimistic view on the GDP growth and inflation.

While the RBA’s official line has been to keep interest rates unchanged, in a separate speaking engagement, the RBA Governor Philip Lowe urged Australians to make sure that the finances could withstand a hike in interest rates.

Lowe was speaking as the launch of the National Financial Capability Strategy.

The RBA Governor’s comments in the context that many households did not experience an interest rate hike. The last rate hike from the RBA came over eight years ago.

In the meeting minutes, the central bank also referenced the risks from the recent trade tensions. The minutes showed that the central bank was concerned with the direction of international trade policy pursued by the United States. It said that the trade policies remained the main source of uncertainty to the global outlook.

The minutes cautioned that further proposed measures were expected to remain small but that there was a broader risk of adverse effects on the investment decisions. It said that confidence in the markets had increased.

The RBA’s previous meeting was held at a time when trade tensions were rising between the United States and China. China had imposed new tariffs on imports from the U.S. and the markets were waiting for a similar response from the U.S.

However, in the last week, the tensions seemed to ease with the U.S. and China expected to negotiate on trade to diffuse the situation.

The RBA’s minutes also touched on the recent drought conditions in Australia. The situation was seen to have pushed up exports from the rural areas during the three months through June.

The RBA said that it would have contributed to an increase in rural exports during the second quarter. However, due to the weather conditions, the downside risks to the forecast existed for the agricultural output and farm exports.

Following the release of the RBA’s meeting minutes, the Australian dollar was broadly muted.

ConfidentToTrade

START TRADING

or practice on DEMO ACCOUNT

Trading CFDs Involves high risk of loss