Aussie remains under pressure although the RBA minutes contained little surprise. The minutes signaled that policymakers were encouraged by recent economic growth. However, subdued wage growth and elevated household debt have suggested that policymakers would keep the powder dry. Meanwhile, the slowdown in the housing market has diminished the urgency for the central bank raise interest rates.

Policymakers remained concerned about the soft inflation outlook, noting faster wage growth is needed to assure a stronger and more sustainable improvement on inflation. As suggested in the minutes, ’employment had grown strongly and the unemployment rate had fallen over the preceding year. However, the improvement in overall conditions had not yet translated into a definitive pick-up in wages growth, which remained low’. It added that ‘further progress on these goals [reducing the unemployment rate and bringing inflation closer to target] was expected over the period ahead, but this process was likely to be gradual’.

On the housing market, RBA indicated that ‘conditions in the established housing market had continued to ease in recent months’, noting the situation was ‘most evident in Sydney’. It added that the growth in housing price had ‘clearly slowed in Melbourne, and this had been most apparent in the more expensive parts of the market’.

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Policymakers noted that low interest rates have contributed to bringing the unemployment rate down to 5.5% and lifting inflation close to target. It added that ‘further progress on these goals was expected over the period ahead, but this process was likely to be gradual’. We expect RBA to stand on the sideline for the rest of the year.

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