RBA Minutes very Dovish – rates on hold

The RBA minutes have just been released and they are very dovish and reveal that there is “no urgency” to tighten as the RBA concedes that “activity is quite subdued” in some parts of the economy.

I will post a full thoughts on this later but for now these minutes imply the hurdle for an RBA rate hike is much bigger than many believed and that the RBA is NOW taking notice of the Household weakness we have been talking about for a long time.

The AUD is under pressure, 3 year swaps have rallied a few points and the implied tightening for the next 12 months is now a few points lower

The key point is that they retain their tightening bias but for now the data is not requiring them to need to hike. Here is the last paragraph to the minutes which captures everything.

This outlook suggested that further tightening in monetary policy would be necessary at some point. Members considered, however, that the flow of data over the past month had not added any urgency to the need for an adjustment to policy. While there had been additional evidence of the coming strong pick-up in investment in the resources sector, activity remained quite subdued in some other important parts of the economy, partly reflecting the Board’s earlier actions as well as the appreciation of the exchange rate. Credit growth remained quite moderate and asset prices had softened. In addition, the global activity data had been somewhat softer and downside risks to the international economy had become a little more prominent over the past month, especially in the case of sovereign debt problems in Europe. Accordingly, members judged that it would be prudent to leave the stance of policy unchanged, pending further data on international developments and on the strength of domestic demand and inflationary pressures. They therefore considered that the current monetary policy setting was appropriate.

Have a great afternoon.

greg@lighthousesecurities.com.au

www.twitter.com/gregorymckenna

This blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

If you do need economic, investment or financial advice we are happy to help and if you are an adviser and would like to join our network we are also happy to help.

Please Email the team at Lighthouse at info@lighthousesecurities.com.au or Greg directly on greg@lighthousesecurities.com.au

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