As expected, RBA left the cash rate unchanged at 0.75%. Dovish bias remains as policymakers struggled to bring down the unemployment rate and boost inflation. Economic developments showed “little changed“. The members affirmed that “a gentle turning point appears to have been reached“. A quarterly Statement on Monetary Policy due this Friday will likely see modest downgrade in GDP growth. According to the central bank, GDP was forecast to expand by “around 2.25% this year” and “around 3% 2021”. One of the reasons for the downgrade was the risks around the “effects of the drought and the evolution of the housing construction cycle”.
With the unemployment rate a key gauge of the members, RBA noted that it will “remain around this level (5.25%) for some time, before gradually declining to a little below 5 per cent in 2021”. This forecast is unchanged from the previous month. Wage growth “remains subdued and is expected to remain at around its current rate for some time yet“. It added that greater improvement “is needed” to push inflation back to target. The path of inflation “were broadly as expected”. The central bank expected that core inflation would “gradually “pick up to “close to 2% in 2020 and 2021”.
RBA maintained easing stance on the monetary policy outlook. As noted in the policy statement, it noted that it is “reasonable to expect that an extended period of low interest rates” in order to “make progress in reducing unemployment and achieve more assured progress towards the inflation target”. Policymakers pledged to continue monitoring “developments in the labour market closely and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time”.
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