In the minutes of the Reserve Bank’s November Monetary Policy Meeting, the board noted that underlining inflation was “more subdued than expected”.
“The CPI data for the September quarter indicated that underlying inflation had declined to a bit above ¼ per cent in the quarter and to 2–2¼ per cent in year-ended terms.
“While quarterly inflation remained subject to a degree of volatility and measurement error, the broad-based nature of the low outcome in the September quarter suggested that inflationary pressures were a bit more subdued than expected. The profile for underlying inflation had been revised down consequently.”
Further, the board noted that house price growth, in particular in Sydney and Melbourne, had eased.
“Credit growth had increased a little over recent months and housing prices had risen further in Melbourne and Sydney, though the pace of growth had moderated and housing prices were steady in other cities. Members noted that supervisory measures were helping to contain risks that may arise from the housing market.”
Taking that into consideration, the board said that the door to further monetary policy easing was still open.
“They judged that the inflation outlook may afford some scope for further easing of monetary policy, should that be appropriate to lend support to demand,” the minutes noted.
“The Board would continue to assess the outlook, and whether the current stance of policy would most effectively foster sustainable growth and inflation consistent with the target.”
The weak inflation outlook and easing house price growth could provide scope for the Reserve Bank to lower the cash rate below 2%.