The Reserve Bank of Australia published the minutes from its meeting held earlier this month. At that time they cut their key interest rate by 25 basis points to 2.25 percent. Minutes do not suggest further rate cuts are on the way -- nor do they imply this will be the only cut. Instead the emphasis is on "uncertainty." The word appears three times in the domestic economy section.
The lack of clear guidance on rates confirms that RBA Governor Glenn Stevens is more concerned about the foreign exchange rate than cheap money. In a typical statement, the RBA emphasized that a lower Aussie dollar would stimulate demand. Members noted that the exchange rate had remained above most estimates of its fundamental value, given the decline in commodity prices over the past year, and that future exchange rate movements would be affected by market expectations for monetary policy, both domestically and abroad. They noted that, all else being equal, a sustained further depreciation would, if it occurred, stimulate growth in the domestic economy and put some temporary upward pressure on inflation.
Members noted the current accommodative setting of monetary policy, which had been providing support to domestic demand. They noted that the Australian dollar had depreciated noticeably against a rising U.S. dollar over recent months, although less so against a basket of currencies, and that it remained above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. Members agreed that a lower exchange rate was likely to be needed to achieve balanced growth in the economy.
Given the large increases in housing prices in some cities and ongoing strength in lending to investors in housing assets, members also agreed that developments in the housing market would bear careful monitoring.
On the basis of their assessment of current conditions and taking into account the revised forecasts, the Board judged that a further reduction in the cash rate would be appropriate to provide additional support to demand, while inflation outcomes were expected to remain consistent with the 2 percent to 3 percent target. In deciding the timing of such a change, members assessed arguments for acting at this meeting or at the following meeting. On balance, they judged that moving at this meeting, which offered the opportunity of early additional communication in the forthcoming Statement on Monetary Policy, was the preferred course.
The RBA issues minutes of its meetings with a two week lag.
Although the RBA's Reserve Bank Board issues a detailed statement at the conclusion of its monthly meetings, investors also look to the minutes for a more detailed description of current economic outlook both domestically and abroad along with the latest RBB policy thinking.
It is only recently that the RBA has released meeting minutes. At the conclusion of their December 2007 meeting, the RBA announced several changes to its communications policy. Previously, a statement was released only if a policy change was made. Now a statement is released at the conclusion of every meeting. Another change concerned the timing of the policy announcement. Rather than waiting until the next day, the announcement occurs immediately after the conclusion of the meeting. In addition, minutes are now released two weeks after the meeting.
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