RBA keeps rates on hold, October the likely next step – Westpac

Bill Evans, an analyst at Westpac, notes that the RBA Board kept the cash rate on hold for another month and retained the theme that rates can be cut “if needed”.

• “We think that case has already been made and expect that to be recognized at the October meeting.
• General commentary in the decision statement is very similar to the August decision statement. The most important changes are to be somewhat guarded on housing markets, “further signs of a turnaround in established housing markets”, but to also point out that construction activity has weakened.
• There is also less apparent confidence in the growth and unemployment forecasts. The 2½ percent forecast for GDP growth in 2019, which was explicitly noted in August, was not mentioned, although the expected return to trend growth “over the next couple of years” is noted.
• With less confidence around the economic forecasts and recognition about the weakening activity in the residential construction sector, this decision statement is marginally more downbeat than the statement in August.
• With the emphasis consistently on the labour market in both statements, the monthly employment reports remain important. However, other factors are also key to the October decision.”