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James Hyerczyk

The Reserve Bank of Australia released its monetary policy minutes earlier in the session with the report offering little insight into the next move in interest rates from the central bank.

According to the minutes, the Monetary Policy Board saw “significant uncertainties” on the economic outlook. It also said it saw scenarios where interest rates could eventually rise, or fall. Additionally, it said the probabilities around these scenarios were more evenly balanced than before.

The RBA minutes also said policymakers believed there is no strong case for a near-term move in interest rates, saying it was better to be a source of stability. Furthermore, current policy should allow for progress on unemployment and inflation. RBA members said they would continue to “assess the outlook carefully.”

Central bank policymakers also addressed the housing market, noting that the current drop in prices is large by historical standards. The minutes went on to say that given the past rise in housing prices, the recent drop in prices should have only a small impact on the economy. However, the RBA did note that “if prices were to fall much further” it could weaken consumption and the Gross Domestic Product (GDP).

The minutes showed the RBA spent some time discussing consumption issues, calling the outlook for consumption a “key uncertainty” for policy.

Another source of concern for the central bankers was the notable drop in home loan approvals by banks due to weaker demand and tighter credit. Furthermore, the RBA minutes showed that policymakers said the pipeline of dwelling investment is large, but unlikely to decline faster than first thought.

The minutes also offered mixed comments on several issues. The RBA concluded that the labor market is stronger than other economic data. Additionally, policymakers noted downside risks to the global economy had increased. Central bankers also said they saw signs China growth has slowed more than implied by GDP data. Finally, the RBA minutes showed policymakers had concluded that trade tensions are a “material risk” to the global economy.

After briefly ticking higher following the release of the RBA minutes, prices quickly retreated lower. At 01:30 GMT, the AUD/USD is trading .7123, down 0.0006 or -0.09%.

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