Members of the Reserve Bank of Australia’s Monetary Policy Board said that global economic conditions are expected to remain on an upward trend barring any unusual or unexpected events, minutes from the board’s May 1 meeting revealed on Tuesday.
Global and domestic inflation remain in line with expectations, the minutes said.
The appreciation of the Australian dollar could slow economic activity, but the board members still believe that the cash rate’s next move is more likely to be up, not down.
“Taking account of the available information, the board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time,” the minutes said.
At the meeting, the RBA maintained its benchmark lending rate at the record low 1.50 percent as slow employment growth and housing market activity provided more space to maintain status quo.
The bank had reduced the rate by 25-basis points each in August and May last year.
Reflecting low growth in labor costs and strong competition in retailing, inflation is forecast to remain low for some time. The central forecast is for CPI inflation to be a bit above 2 percent in 2018.
“Members observed that spare capacity in the labor market and associated low wages growth had continued to keep inflation low, particularly for market services,” the minutes said.
The bank said various forward-looking indicators continue to point to solid growth in employment in the period ahead, with a further gradual reduction in the unemployment rate expected.
“Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual,” the minutes said.