Aussie Dollar Flat after RBA Minutes Show Risk for Move in Rates “Evenly Balanced”Minutes of the RBA March policy meeting showed member spent considerable time trying to strike a balance between the damaging effects of crumbling home prices on consumer spending against a sturdy labor market when it left interest rates at a record low earlier this month.
The Australian Dollar is trading flat early Tuesday after the Reserve Bank of Australia (RBA) released the minutes of its March 5 monetary policy meeting. The minutes showed the risk for interest rates to go in either direction was “evenly balanced”.
“Members agreed that there was not a strong case for a near-term adjustment in monetary policy,” it said. “Rather, they assessed that it would be appropriate to hold the cash rate steady while new information became available that could help resolve the current tensions in the domestic economic data.”
The RBA has left interest rates unchanged at 1.50 percent since August 2016, but a growing number of traders, analysts and economists are now predicting a cut later this year. Going into the release of the minutes, the financial markets were pricing in a 25-basis point cut by August.
Minutes of the RBA March policy meeting showed member spent considerable time trying to strike a balance between the damaging effects of crumbling home prices on consumer spending against a sturdy labor market when it left interest rates at a record low earlier this month. At issue was the fall in the supply and demand for home loans and the implications of cooling housing prices on the country’s economy.
RBA policymakers concluded that reduced demand from borrowers, particularly property investors, largely were to blame for the credit slowdown. Additionally, recent weakness in household consumption was especially hit by nose-diving property prices.
The minutes indicated policymakers fear negative wealth effects from housing would hurt the wider economy. This is why the RBA is so focused on the resilience of employment.
“Members agreed that development in the labor market were particularly important,” the minutes showed.
“There continued to be considerable uncertainty around the outlook for consumption given the environment of declining housing prices in some cities, low growth in household income and high debt levels.”