Policymakers retained their easing bias in the RBA minutes for the October meeting. Yet, the stance appeared to be weaker than previous ones. The central bank decided that it should 'again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them'. It pledged to 'continue to examine the data over the months ahead to assess whether monetary policy was appropriately configured'. The easing bias is aimed at curbing the appreciation of the Australian dollar. Yet, the Aussie surged to a 4-month high after the minutes.
On economic developments, the RBA noted that 'the information to hand at the meeting was consistent with growth of economic activity remaining below trend over the next year or so before an expected pickup'. On the property market, the minutes stated that 'the effect of low interest rates was evident across a range of indicators and had further to run. House prices and turnover had increased and leading indicators pointed to a pick-up in dwelling investment over the period ahead. While credit growth remained moderate, there were signs of an increased appetite for borrowing, most notably among investors'. Policymakers also acknowledged the 'noticeable' improvement in business confidence recently with some 'trade-exposed' firms reporting an improved outlook to the bank. According to the minutes, although the improved confidence was 'generally yet to translate into concrete plans for higher investment [and] employment', it has led to improvement confidence in the investment in tourism. Policymakers added that they were uncertain about the sustainability of the confidence.
Another development mentioned in the minutes was the appreciation of the exchange rate. It was a surprise that the RBA did not reiterate its preference for a lower exchange rate, after it had stated at the post-meeting statement that 'a lower level of the currency … would assist in rebalancing growth'. In the minutes, policymakers attributed the recent rebound in Australian dollar to the Fed’s decision not to taper and better Chinese data. Similar to the observation of the pickup of sentiment the RBA stressed that 'it was difficult to know how significant the effects of' these developments would be as 'it was uncertain whether they would be sustained'.
Although economic activities continued grow below trend, the RBA appeared to be more confidence that consumer and business confidence would continue to improve as a result of low interest rates. It is expected that the central bank would leave the cash rate unchanged at 2.5% through the year end but deterioration of the US fiscal situation and a rapid rise of housing prices might trigger the RBA to act accordingly.
On economic developments, the RBA noted that 'the information to hand at the meeting was consistent with growth of economic activity remaining below trend over the next year or so before an expected pickup'. On the property market, the minutes stated that 'the effect of low interest rates was evident across a range of indicators and had further to run. House prices and turnover had increased and leading indicators pointed to a pick-up in dwelling investment over the period ahead. While credit growth remained moderate, there were signs of an increased appetite for borrowing, most notably among investors'. Policymakers also acknowledged the 'noticeable' improvement in business confidence recently with some 'trade-exposed' firms reporting an improved outlook to the bank. According to the minutes, although the improved confidence was 'generally yet to translate into concrete plans for higher investment [and] employment', it has led to improvement confidence in the investment in tourism. Policymakers added that they were uncertain about the sustainability of the confidence.
Another development mentioned in the minutes was the appreciation of the exchange rate. It was a surprise that the RBA did not reiterate its preference for a lower exchange rate, after it had stated at the post-meeting statement that 'a lower level of the currency … would assist in rebalancing growth'. In the minutes, policymakers attributed the recent rebound in Australian dollar to the Fed’s decision not to taper and better Chinese data. Similar to the observation of the pickup of sentiment the RBA stressed that 'it was difficult to know how significant the effects of' these developments would be as 'it was uncertain whether they would be sustained'.
Although economic activities continued grow below trend, the RBA appeared to be more confidence that consumer and business confidence would continue to improve as a result of low interest rates. It is expected that the central bank would leave the cash rate unchanged at 2.5% through the year end but deterioration of the US fiscal situation and a rapid rise of housing prices might trigger the RBA to act accordingly.
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