Minutes of the RBA in February: Consumption is a key uncertainty

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Minutes of the February 2019 meeting of the Reserve Bank of Australia

And consumption not the only …

Key points (via the Reuters summary):

  • The Monetary Policy Council has witnessed "significant uncertainties" about the economic outlook
  • The board has seen scenarios where interest rates could eventually rise or fall
  • the probabilities around these scenarios were more balanced than before
  • no strong arguments in favor of a rise in short-term rates, it would be better to be a source of stability
  • current policy is expected to make progress on unemployment and inflation
  • members would continue to "carefully evaluate perspectives"
  • The council has spent time in the housing market, prices fall by historical standards
  • given past price increases, the recent fall is expected to have only a small economic impact
  • However, "if prices were to fall much further", this could weaken consumption, pb
  • the prospects for consumption, a "key uncertainty" for the policy
  • bank loans to banks drop significantly due to weak demand and credit crunch
  • pipeline of major housing investment, but likely to decline faster than expected
  • labor market stronger than other economic data
  • Council noted that downside risks to the global economy had increased
  • growth signs of China had slowed more than expected by the GDP data
  • trade tensions a "material risk" for the
    global perspectives

AUD earns a few points on the minutes, but not much, 15 points at most (as and when the update).

Note the line that the RBA sees itself as a source of stability. That sounds good … but since the RBA ignores one of its (only) mandates (ie it has systematically missed the inflation target for years and the forecasts of inflation are constantly wrong, overestimating), I suggest not knowing why the RBA ignores this part of its mandate is another source of uncertainty, not stability.

Speaking of stability … or instability instead. Why does the minutes mention it?

  • The board has seen scenarios where interest rates could eventually rise or fall
  • the probabilities around these scenarios were more balanced than before

and yet, was the "best balance" not included in the statement that accompanied the announcement of the meeting? Lowe dropped this bomb the next day in his speech. Rocked the market, then slammed … not really improve stability. TD even said that it was misleading.

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For the background:

and to come:

ForexLive

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