The Reserve Bank of Australia (RBA) on Tuesday will most likely pass up the chance to clarify the outlook for monetary policy.

The RBA is due to publish the minutes of its November 3 board meeting on Tuesday morning but, judging by its public comments so far this month, the central bank is comfortable with the uncertainty clouding the likely outcome of next board meeting on December 1.

In announcing its November 3 decision to move the cash rate to 3.5 per cent from 3.25 per cent, the RBA published a terse, one-page media release.

The 76-page quarterly Statement on Monetary Policy (SOMP) three days later, on Friday, November 6, can be seen as a director’s cut of the media release - what the RBA would have said if given more time and space.
Full Story

A dip in retail spending does not mean the recovery has stalled.

On the contrary, it confirms the recovery is proceeding according to plan.

Back in August, the Reserve Bank of Australia (RBA) released its quarterly monetary policy statement.

In it, the central bank forecast the economy would grow by a half per cent over 2009.

According to the latest national accounts, gross domestic product (GDP) had already grown by exactly twice that amount by mid-year.

The brighter outlook built on that better performance to date should be evident in the next edition of the quarterly statement to be published by the RBA on Friday.
Full Story

Aside from reminding us that November is not just a bad month for punters, but for borrowers as well, the Reserve Bank of Australia (RBA) has confirmed its intention to continue gradually tightening the monetary thumbscrews.

The RBA confirmed the expectations of market economists with its decision to raise the cash rate a quarter of a percentage point to 3.5 per cent.

The move followed an increase to 3.25 per cent from 3.0 per cent a month earlier.

After the latest announcement on Tuesday, the upward path of interest rates built into cash rate futures traded on the Sydney Futures Exchange became a little less steep.

Even so, the market still has cash reaching 5.0 or 5.25 per cent by the end of 2010.
Full Story

Divergent opinions on by how much and how quickly the Reserve Bank of Australia (RBA) will lift interest rates reflect a range of quite different paths the economy could follow from here.

Most commentators expect the RBA to follow up its quarter percentage point interest rate rise this month with more of the same into 2010.

The cash rate futures market has factored in rises of that size at each of the seven monthly meetings to June (the RBA takes a break in January), taking the cash rate to five per cent.

Some suspect the RBA might throw in a half percentage point move or two, possibly as soon as November, while others think a more softly softly approach, with the occasional pause to wait and see - and possibly even backtrack - is more likely.
Full Story

Reserve Bank of Australia assistant governor, economic, Philip Lowe, says interest rate rises should not cause home buyers difficulties.

“I think most borrowers understood that the setting of monetary policy we had over the last year was unusual,” Mr Lowe told a conference in Sydney on Monday.

“As interest rates rise, I think most people have factored that into their budget considerations, so we are not expecting that to cause budgetary difficulties.”

Mr Lowe was addressing the Citigroup Australian Investment Conference.
Full Story

The ultra-low cash rate is an argument for an interest rate rise this year, but it is not the only way of gauging the stance of monetary policy.

The futures market has factored in a lift in the cash rate, the overnight interbank loan rate used by the Reserve Bank of Australia (RBA) to influence borrowing and lending rates, to 3.5 per cent by the end of the year.

The market shows the RBA is expected to give us a reprieve at its meeting this coming Tuesday, but will then jack the cash rate up by half a percentage point over the three subsequent meetings, held on the first Tuesday of every month except January.

Two weeks ago, RBA governor Glenn Stevens told a parliamentary committee that the cash rate was pushed to its 49-year low of three per cent to cope with “a global situation that none of us has lived through before”, but suggested it may no longer be appropriate.
Full Story

Some time in the coming 103 days the Reserve Bank of Australia (RBA) will probably jack its benchmark interest rate up by half a percentage point - at least that’s what the futures market is betting - even as the economy continues to stagnate.

That would take the cash rate to 3.5 per cent from its current 49-year low of 3.0 per cent.

Barring genuine emergencies, the central bank only announces changes to its preferred level for the cash rate when its board holds its monetary policy meetings on the first Tuesday of each month (except January).

That means there are now only four opportunities remaining this year for the RBA to start ” removing some of the current expansionary policy setting, as it described it in classic central bank style in the minutes of its August 4 meeting released on Tuesday.
Full Story

The Reserve Bank of Australia (RBA) has revised its forecast for the local economy to shrink during 2009, while inflation will moderate as a consequence of the global economic downturn.

The RBA forecast in its statement on monetary policy on Friday that gross domestic product (GDP) would shrink by 1.25 per cent over the year to the June quarter of 2009, before the pace of decline eased to one per cent by the December quarter.

In its February statement, the central bank had projected GDP to grow by an annual rate of 0.25 per cent to the June quarter of 2009 and 0.5 per cent by the December quarter.

Non-farm GDP would post a contraction of 1.5 per cent during the year to the June quarter 2009 and shrink by one per cent over the year to the December quarter, the RBA said.
Full Story

The Reserve Bank of Australia (RBA) has left official rates unchanged, citing “signs of stabilisation” in the global economy and a pick-up of activity in China.

The central bank’s decision to leave the cash rate at a 49-year low of 3.0 per cent on Tuesday had been widely tipped by economists, coming after 425 basis points of reductions since September last year.

“Monetary policy has been eased significantly,” RBA governor Glenn Stevens said in a statement.

He said those rate changes had yet to have an impact on the economy, but, together with substantial fiscal initiatives, would provide significant support to domestic demand during the period ahead.
Full Story

Only 21 more sleeps before the next interest rate cut from the Reserve Bank of Australia!

After its usual holiday in January, the monthly monetary policy meetings of the RBA’s board resume again on February 3.

A cut in the overnight cash rate, currently 4.25 per cent, is not a mathematical certainty, but is as close as it gets as far as monetary policy is concerned.

The size of the cut is another matter.
Full Story

Official interest rates have fallen to the lowest levels in decades and are expected to keep going in the same direction in 2009, as the Reserve Bank of Australia (RBA) tries to protect the nation from recession.

The 2008 year will go down as the year of the RBA’s big U-turn on monetary policy, when rates fell from a 12-year high to the lowest level in 35 years.

From dealing with the threat of inflation to suddenly being confronted by a stalling economy, RBA governor Glenn Stevens, has had a hectic year that was, in his own words, “perhaps a little too interesting”.
Full Story

Monetary policy will help to support the Australian economy - not that it’s as easy as it used to be to ease monetary policy.

In the old days before, say, July last year, all a central bank had to do was to lower the target for its benchmark interest rate, the overnight cash rate in the case of the Reserve Bank of Australia (RBA).

As part of that, it would boost liquidity in the banks’ accounts with the central bank and let that extra supply push the price of cash down to the target rate.
Full Story

Dr Peter Brain, Executive Director, National Institute of Economic and Industry Research maintains that the Reserve Bank is sitting on a knife’s edge and that it’s only got itself to blame.

Brain admits that his outlook is pessimistic; his concern being underlying inflation.

He says the prudent move would have been to keep interest rates on hold on 2 September and not lower the cash rate until there was certainty that the underlying inflation rate is trending down.

Brain’s quarrel with the RBA is its “privatised” money policy regime. “Where no intermediate target for credit growth has been set (as is the case in the monetary policy of the European Union) and where credit growth in excess of desired nominal GDP growth is taken as a sign of a healthy economy.”
Full Story