AU: RBA Meeting Minutes

Mon Apr 20 20:30:00 CDT 2015

The Reserve Bank of Australia published minutes from its rate setting meeting held earlier this month. At that time, they disappointed the markets and kept the cash rate unchanged at 2.25 percent. The Board members said that the outlook for global economic growth had not changed over the month. They noted that the apparent slowing of growth in China, in particular the further deterioration in conditions in the Chinese property market, had placed some additional downward pressure on the demand for steel and on the prices of Australia's key commodity exports.

Data available at the time of the meeting suggested that the Australian economy had continued to grow somewhat below trend in the December quarter and into the first quarter of 2015. There had been evidence to suggest that the growth in consumption and dwelling investment had picked up, supported by the very low levels of interest rates. Exports were also growing. However, a significant pick-up in non-mining business investment had not occurred and several indicators suggested it would remain subdued for longer than had earlier been anticipated.

Members remained alert to the possibility that the low levels of interest rates could foster imbalances in the housing market. The most recent data suggested that activity in the housing market had remained strong, but there had been little change to housing market conditions overall or in the growth of housing credit in early 2015.

"In considering whether or not to reduce the cash rate further at this meeting, members discussed the various channels through which monetary policy was affecting the economy at present, including the asset price and exchange rate channels." They noted that the responsiveness of borrowers and savers to changes in interest rates and asset prices was unusually uncertain in a world of very low interest rates and high household leverage. Members also saw advantages in receiving more data, including on inflation, to assess whether or not the economy was on the previously forecast path and allowing more time for the economy to respond to the reduction in the cash rate earlier in the year.

Taking all these factors into account, the Board judged that it was appropriate to hold interest rates steady for the time being, while accepting that further easing of policy may be appropriate over the period ahead to foster sustainable growth in demand and inflation consistent with the target. The Board would continue to assess the case for such action at forthcoming meetings.

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.