RBA minutes unexpectedly dovish, central bank set to continue balancing act on rates

The minutes of the Reserve Bank of Australia's (RBA) April meeting released earlier today showed members discussed increased risks in the property market as well as employment figures that continue to disappoint.

The RBA sounded unexpectedly dovish which suggests the central bank is set to continue balancing act on rates. Minutes suggest concerns about the inflation outlook are rising. With an uncertain outlook for the commodity markets and disappointing developments in the labour market, normalisation of monetary policy is still some way off.

Australia's unemployment rate has been rising since late 2016. The Board was clearly disappointed by the soft employment report in February and in particular the tick-up in the unemployment rate to 5.9 percent. The disappointing February labour market data and increasing concerns around household debt provide sufficient reason for the RBA to act cautiously for now and to bank on a rather weaker currency.

"The RBA will be watching to see if tighter lending standards are having an impact (recent housing finance data suggest they might be), while the Q1 inflation report due on 26 April will be a key input to policy deliberations," said ANZ in a report.