This is via a Barclays note on the Reserve Bank of Australia minutes (September meeting minutes released yesterday)
(In summary, bolding mine)
- The minutes of the RBA's August meeting highlight that the RBA is becoming increasingly optimistic on the outlook for the labour market and is content with the progress of the housing market. But there are no real hints that it is thinking about raising interest rates.
- The RBA's comment that "solid employment growth was expected to continue" came true when last week's data showed that employment grew by 54,200 in August.
- RBA doesn't seem too concerned by the stagnation in wage growth at a record low in the second quarter. It assumes it will pick-up "in response to the strengthening labour market". We're not so sure given that labour markets in other economies have been stronger for longer and have not generated much wage growth. For us, this poses a downside risk to the RBA's consumption and GDP growth forecasts.
- The minutes didn't suggest that the RBA is becoming any more worried about the dollar hovering close to US$0.80 as they merely repeated that "a further appreciation...would be expected to result in a slower pick-up in growth and inflation".
- What's more, the RBA seems happy enough with the easing in the housing market and it repeated that "there had been clearer signs of an easing in conditions in the Sydney market but less so in Melbourne".
- Overall, the RBA is clearly becoming more optimistic on the outlook, but equally it's in no rush to raise interest rates when that would strengthen the dollar and perhaps mean the housing market slows too far too soon. We doubt rates will rise until late 2019, which would be a year later than the financial markets expect.
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Other responses (I posted yesterday):
