AU: RBA Meeting Minutes

Mon Aug 14 20:30:00 CDT 2017

The Reserve Bank of Australia has published the minutes of its August 1 meeting. Officials at that meeting kept the policy interest rate unchanged at a record low of 1.50 percent, again concluding that current policy settings were consistent with sustainable growth and achieving the inflation target "over time". This rate was last changed in August 2016 when it was cut by 25 basis points.

The minutes note that officials' updated forecasts for output growth and inflation, published shortly after the meeting, were little changed from the previous forecasts prepared three months earlier. Output growth was expected to reach around 3.0 percent in year-ended terms during both 2018 and 2019, while underlying inflation was expected to be close to 2.0 percent over the second half of 2017 and "to edge higher" over the subsequent two years. More up-to-date public comments made since the August meeting by RBA Governor Phillip Lowe have reaffirmed this assessment of the outlook

Officials stressed at the August meeting that their forecasts assumed no change in the Australian dollar exchange rate over the forecast period. In the weeks leading up to this meeting, the currency had appreciated significantly to its strongest level in more than two years, and officials noted that any further appreciation of the currency would likely result in a slower pick-up in both economic activity and inflation. Since the meeting, the currency has reversed some of its recent gains but still remains at relatively strong levels.

Although a stronger currency could strengthen the case for a cut in policy rates, the minutes also show that officials are more confident about the employment outlook, perhaps decreasing the urgency for any move to loosen policy further. Officials also remain explicitly concerned about high levels of household debt, suggesting they are reluctant to lower rates further as this would likely encourage households to borrow even more.

The minutes concluded by noting that available information had persuaded officials that current policy settings remained appropriate. The minutes' discussion of the exchange rate and levels of household debt suggest there are offsetting pressures that could extend this period of policy stability at least for the next few months.

The Reserve Bank of Australia (RBA) publishes minutes of its meetings with a two week lag. The text expands on the statement published two weeks earlier at the time of the announcement.

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.