RBA sounded cautiously upbeat in the minutes of November 6 meeting. There it noted that “Australian economy had continued to improve and had been a little stronger than expected”. However, “outlook for consumption continued to be a source of uncertainty in an environment of slow growth in household incomes”. Conditions in the labor market had also be “stronger than expected”, and “forward-looking indicators of labour demand continued to point to ongoing strength in the near term”.

Nevertheless, underlying inflation remained “low and stable”, consistent with previous forecasts. Housing market conditions in Sydney and Melbourne “had continued to ease”. “Housing credit growth had declined, particularly for investors, but had continued to be higher than growth in household income”.

Overall, RBA maintained that “the next move in the cash rate was more likely to be an increase than a decrease, but that there was no strong case for a near-term adjustment in monetary policy.”

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There are also two interesting points to note. Firstly, RBA noted the depreciation in Australian Dollar exchange rate in 2018. And to the board member “this had reflected offsetting effects on the exchange rate from higher commodity prices, on the one hand, and the decline in Australian bond yields relative to those in other major markets, on the other hand.”

Regarding future monetary policy moves, board members discussed how different scenarios could affect the decision. And, “the appropriate policy response would depend on the specifics of the situation, including the underlying factors driving economic developments.” RBA also quoted an example in the minutes. “For example, in the event of a marked change in the strength of the global economy, the effect on the Australian economy – and thus the appropriate monetary policy response – would depend on any associated move in the exchange rate of the Australian dollar

Full minutes here.

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