[SYDNEY] Australia’s central bank saw no need for an immediate cut in interest rates at its September policy meeting, given some stickiness in services inflation and steady employment, while future easing would be data dependent.
Minutes of the meeting released on Tuesday (Oct 14), showed the Reserve Bank of Australia (RBA) board would be focused on readings for inflation and consumption in the third quarter when it next meets on Nov 4.
The board decided to hold the cash rate at 3.6 per cent, following three quarter-point cuts so far this year, and judged there were still risks to the upside and downside for the economy.
“There was no need for an immediate reduction in the cash rate target,” they concluded. “Looking ahead, members noted that it was appropriate for the Board’s decisions to remain cautious and data dependent.”
Markets imply around a 50-50 chance the RBA will ease at its next meeting, with a 70 per cent probability of a move in December. Just one more cut is fully priced in, and only a modest chance of reaching 3.1 per cent.
The board judged policy was still a little restrictive, though a pick-up in house prices and home loans suggested past rate cuts had some impact.
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Consumer demand had also picked up faster than previously expected and looked like continuing, the minutes showed, though some more recent data has cast some doubt on the strength of spending.
The board noted monthly readings on consumer prices for July and August pointed to upside risk for third-quarter inflation, particularly on services and home building costs.
Markets suspect a high reading for core inflation, due later this month, would argue against a near-term rate cut.
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Analysts generally assume a rise of 0.7 per cent or less for the quarter would green-light an easing, while 0.9 per cent or more would likely prevent a move. An increase of 0.8 per cent is a grey area, making a cut a line ball call for the RBA board.
On the labour market, board members judged it was still a little tight overall, though the extent was hard to determine. While employment growth had slowed, the jobless rate remained steady at 4.2 per cent in August.
Some members also noted indicators suggested a risk that wage growth in the private sector could slow more than expected in the coming months.
The global outlook remained highly uncertain, with the impact of US tariffs still feeding through and the Chinese economy looking weaker than previously expected. REUTERS
