$A gives back gains from RBA minutes

In its June rate decision statement, the RBA left out any reference to the need for “further policy adjustments”, but also pointed to inflation remaining low for “some time”, which gives it room to cut rates further if needed.

Consumer prices were below trend and are projected to stay that way, allowing the bank to keep the rate unchanged at 1.75 percent.

The Australian dollar has come off the boil after rising to a six-week high on the back of the Reserve Bank’s neutral stance.

The RBA said there continued “to be indications that the effects of supervisory measures” had strengthened lending standards by major banks. “While inflation remains muted, and poses a risk of additional policy loosening from the RBA, we believe economic data will remain robust and forecast”.

Turnover in the cash bond market was around A$2.5 trillion (S$2.5 trillion) in 2015, but that was dwarfed by turnover in Australian dollar interest rate swaps and bond futures which amounted to around A$9 trillion each.

“Long-term inflation expectations had also remained below average”, it said.

“While the latest suite of data had confirmed that labour cost pressures remained subdued in the March quarter, a few of the wage measures were slightly more positive”, the bank said. Some economists were expecting an overt easing bias in the minutes.

“In summary, the minutes of the June Board meeting underscore that the RBA’s approach to delivering inflation outcomes consistent with target will be measured”, she wrote.