MNI BRIEF: Less Restrictive Conditions Discussed - RBA Minutes
MNI (SYDNEY) - The Reserve Bank of Australia board noted inflation could prove less persistent, even without weaker-than-expected activity, should rent inflation or petrol prices fall faster than expected, leading to less restrictive financial conditions, the minutes of September’s meeting showed.
The material decline in other commodity prices could also reduce firms’ cost base “or the decline in discretionary spending flowed through materially more quickly to services inflation,” the minutes stated.
The board however, stressed a pick up in consumption growth following a recovery in real household disposable income could also lead to rates staying restrictive. “If that were to occur, labour market outcomes could be stronger than forecast and inflation would return to target more slowly,” the board stressed. “Another was if the outlook for aggregate supply proved to be more constrained than currently expected – for instance, if the economy’s current supply potential had been overestimated or if future productivity growth turned out to be weaker than assumed.”
The Board decided to hold the cash rate at 4.35%. (See MNI RBA WATCH: Changed Messaging Considered In Hawkish Hold) It next meets Nov 4-5.