Commenting on the minutes of the RBA’s latest meeting, ANZ has said that while it expects the Bank to keep the cash rate on hold at 1.5 per cent as it assesses the impact of the May and August rate cuts, it sees “a clear risk of further easing given the low inflation outlook”.
According to ANZ, the RBA remains “more than usually uncertain” about the labour market, with measures of underemployment suggesting that overall labour underutilisation remains high.
ANZ said that the board is also concerned about negative feedback from housing into inflation, and the impact of international monetary policy on the exchange rate.
The bank also highlighted that the minutes of the Reserve Bank’s meeting suggest a higher degree of uncertainty around the Bank’s outlook: “We think that the RBA will want to assess the impact of the May and August cuts on the labour market and housing market, while inflation data [will] come into play when the third-quarter CPI is published on 26 October.
“The exchange rate also will continue to be an important input into monetary policy deliberations given that it appreciated after the August rate cut and is near the high reached in April,” ANZ said.
According to ANZ, the RBA’s easing bias is “quite strong”, particularly when many banks passed on only half the August rate cut to variable home loan customers.