RBA Minutes: Q4 Growth Faster than Expected, but Housing Risks Remain

AUD  USD Daily Chart

AUD USD Daily Chart

Members of the Reserve Bank of Australia's monetary policy board expect to see consumer prices continue to rise, although at a gradual pace, minutes from the bank's March 7 meeting revealed on Tuesday.

"The board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time", the minutes said.

On this occasion, they just happened to be on the housing and labour markets, two of the three key areas previously highlighted by the governor.

"Recent data continued to suggest that there had been a build-up of risks associated with the housing market".

The prospect of increased macroprudential measures to slow investor activity has been getting increased traction recently following remarks from several leading policymakers, including from the RBA, APRA and federal treasurer Scott Morrison, that tighter lending standards could be on the way. "This is in part about reducing the risks to financial stability when it's too early to consider raising rates".

The yield on the benchmark 10-year Treasury note, hovered around 2.82 percent, the yield on 15-year note also traded flat at 3.21 percent and the yield on short-term 2-year remained steady at 1.81 percent by 04:20 GMT.

However, the RBA noted that an appreciating exchange rate would complicate this adjustment.

Given the RBA's March meeting pre-dated the release of Australia's February jobs report - something that was far weaker than what had been anticipated - it's likely that the RBA would have been disappointed by the result, and could potentially see angst over the strength of labour market conditions increase.

"Another weak employment report would see the RBA's forecasts for employment and wages growth tested", said Aird.

With Lowe repeatedly arguing against cutting rates further, financial markets have all but priced out the chance of another cut this year.

That's a similar view to Westpac which also has interest rates on hold for all of this year and next. The central bank was notably more upbeat about the global outlook and the flow on effect to higher commodity prices.

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