Minutes of the Monetary Policy Meeting of the Reserve Bank Board - March 2018

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The Decision

The Board decided to leave the cash rate unchanged at 1.5 per cent.

Considerations for Monetary Policy

Domestically, business conditions had continued to improve and non-mining business investment had continued to increase over the preceding year, while household consumption had increased only moderately. Employment had grown strongly and the unemployment rate had fallen over the preceding year. However, the improvement in overall conditions had not yet translated into a definitive pick-up in wages growth, which remained low. Forward-looking indicators suggested that spare capacity in the labour market would continue to decline gradually over 2018 and, as a consequence, wages growth was expected to rise gradually.

The low level of interest rates over 2017 had played a role in reducing the unemployment rate and bringing inflation closer to target. Further progress on these goals was expected over the period ahead, but this process was likely to be gradual. Over 2018, GDP growth was expected to exceed potential growth and CPI inflation was expected to increase gradually to be a little above 2 per cent. Members observed that, on a trade-weighted basis, the Australian dollar remained within its range of the preceding two years but that an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than forecast.