The Reserve Bank board members believe that their next interest rate move will be a hike, though it may not come for some time yet.
The minutes of the RBA’s April board meeting show Governor Philip Lowe’s recently stated view that the next move for the cash will be a rise was shared by the other eight board members.
‘In current circumstances, members agreed that it was more likely that the next move in the cash rate would be up, rather than down,’ the minutes, released on Tuesday, said.
But with unemployment only falling gradually and inflation still below the RBA’s target range, the board members also agreed that there was not a strong case for a rate hike in the near term, the minutes said.
The cash rate has stood at a record low of 1.5 per cent since August 2016, and financial markets are expecting it to remain there until mid-2019.
ANZ head of Australian economics David Plank said the minutes indicate the RBA board sees a case for hiking rates, but will wait for that case to improve.
‘We think the uncertainty about the outlook for household spending will constrain action on the part of the bank until wages accelerate meaningfully and the bank gets more comfortable with how the shift from interest only loans to principal and interest loans is impacting,’ Mr Plank said.
‘This is unlikely to be until May 2019 at the earliest, in our view.’
The RBA board is also watching the recent falls in house prices in the major markets of Sydney and Melbourne, noting a fall of just under five per cent in Sydney since their peak in mid-2017.
The minutes indicate the central bank is not too concerned about the market, saying that the board members also noted that there had been falls of around 10 per cent in some cities within the last 15 years.
New tariffs announced by the US, and China’s response with its own tariffs, are also a concern for the RBA, though the board believes they are currently unlikely to have a significant effect on global trade.
‘The possibility of an escalation in trade restrictions represented a risk to the global outlook that needed to be monitored closely,’ the minutes said.