RBA Minutes Reveal Strong Easing Bias

By Glenn Dyer | More Articles by Glenn Dyer

No surprises from minutes of the Reserve Bank September meeting a fortnight ago as the central bank maintained its ready to ease stance while it waits for further economic data.

It will get a further update on the health of the economy tomorrow when the August labour force data is released by the Australian Bureau of Statistics.

The watch and hold stance was maintained even though the minutes made it clear the board was watching closely weakening global economic conditions and further monetary easing by other central banks.

The European Central Bank moved to further ease policy last week with a cut in its key rate to minus 0.5% from minus 0.4% and the commitment to buy up to 20 billion euros of bonds a month to try and push longer-term interest rates lower.

The Fed is expected to again cut the Federal Funds rate by 0.25% at the two-day meeting that started overnight Tuesday. The outcome will be announced around 4am Thursday.

The Bank of Japan and Bank of England also hold policy meetings on Thursday with the results known later tomorrow night, Australian time.

The RBA held the cash rate at a record low 1.0% two weeks ago and the minutes made it clear the bank was watching events offshore closely.

The attack on the Saudi oil facilities at the weekend and rise in global oil prices will add to the RBA’s unease at offshore events.

The board kept the door open to further domestic easing against a backdrop of continued weak consumption and low wages, while members anticipated a 0.5% increase in GDP for the June quarter.

Members noted the federal government’s tax offsets had so far failed to give retail spending a meaningful lift, though they expected this to materialise in the coming months.

The RBA, which cut the cash rate by 0.25 percentage points in both June and July, indicated it could cut again to support sustainable growth and to eventually hit its inflation target.

The current policy stance was summed up in the final paragraph of the minutes which repeated sentiments in the final paragraph of the post-meeting statement from Governor Philip Lowe two weeks ago:

“Based on the information available, members judged that it was reasonable to expect that an extended period of low-interest rates would be required in Australia to make sustained progress towards full employment and achieve more assured progress towards the inflation target.

“Members would assess developments in both the international and domestic economies, including labour market conditions, and would ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.”

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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