RBA Sept Board Meeting Minutes: cautious on global growth; local growth shows “unexpected resilience”; debating risks of policy adjustment
September 15th, 2009 · No Comments
- The RBA remains on message: an outperforming Asian region; local economy performing better than expected; in due course “less expansionary” policy required.
- However, there is still caution and balance throughout the minutes where “some uncertainty remained about the outlook both abroad and at home”.
- Critically, there was again no mention of the cash rate being at “emergency levels”, and that the emergency no longer exists. Was the Governor’s strong semi-annual testimony language a red herring?
- The soft tightening bias was a repeat of last month where “if the economy evolved as anticipated in the forecasts, the Bank would in due course need to adopt a less expansionary policy stance”.
- Importantly, this clear cautious communiqué was already in place ahead of last week’s barrage of soft data (falling retail sales, housing finance and full-time employment). Is that the post-fiscal policy economy the RBA already envisaged? Or it is a worrying turn of events?
- Market reaction: AUD a little softer after the headlines, currently $US0.86, 1y1y down a few bps to 5.30, curve steepening welcome (and expected) but somewhat distorted by futures rollover.
- The RBA must be the only commodity-country central bank not talking down the currency. ‘Wait and see’ is the clear option for the RBA. The odds of a rate hike by year end are moving in the right direction: current OIS pricing a much more realistic one 25bp hike for the December meeting – only a week ago it was over two 25bp increases by year end.
- While alert to any lift in RBA rhetoric and pickup in growth momentum, nothing convinces at this point in time to bring the initial tightening forward.
Tags: Australia and New Zealand
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