AU: RBA Meeting Minutes

Mon Mar 16 19:30:00 CDT 2015

The Reserve Bank of Australia published minutes from its monetary policy meeting held earlier this month. At that time, they left the cash rate unchanged at 2.25 percent. The RBA recognizes that another cash rate cut may be appropriate ahead but says it is better to wait and see if the economy remains on the path it forecast. Markets had anticipated the bank to lower interest rates for a second straight month in March, but the RBA instead paused. Many analysts assumed runaway housing prices were the key constraint, at lower borrowing rates would add fuel to the fire. The Australian dollar fell after the minutes were released suggesting markets interpreted them as being supportive of near term rate cuts.

The Bank saw advantages in getting more data to prove the economy is on its forecast path, the minutes said. While low interest rates may support consumption through an increase in disposable income "the net effect on consumption through this transmission channel was a function of a number of factors - including the distribution of loans and interest-bearing assets across households and the extent to which the consumption behavior of different households responds to low interest rates."

The minutes included a section on financial stability which is being discussed ahead of the half-yearly Financial Stability Review due March 25. The RBA said risks in the household sector continued to be centered on housing and mortgage markets and the composition of these remained skewed to investor activity - especially in Sydney.

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.