RBA Minutes: “Case could be made to ease” but they didn’t – ANZ

The Australia and New Zealand Banking Group (ANZ) recently came out with their analysis of the Reserve Bank of Australia’s (RBA) latest monetary policy meeting minutes. The bank ruled out the odds of RBA rate cut in the December month while expecting a move in February.

Key quotes

“The key question then is how long does the Board think it needs to wait? We think the keywords related to timing in the above statement are: “full  assessment” (emphasis added). In our view this points to the next forecast update by the RBA in February.”

“The Board’s November meeting took place  after  the September retail sales data was published. So clearly the Board did not view the weakness in those numbers as justifying a rate cut in November. The October retail sales data are not published until after the RBA’s December meeting, as is the Q3 GDP report. So there will be no additional “evidence on spending by households” until after the December meeting takes place.”

“Much of the discussion at the Board meeting was on the content of the RBA’s revised forecasts, which we have reported on elsewhere. Outside of this discussion and the policy considerations discussed above, the most interesting aspect of the minutes was perhaps the discussion of whether rate cuts themselves could be having a negative impact on sentiment.”

“No firm conclusion appears to have been reached about this possibility, though the judgment in the minutes that the “usual transmission channels” were working suggests that any concern about this potential negative development is most likely moderate.”

“So it seems a November rate cut was actively discussed, but the Board held off to wait for more evidence about the impact of the easing that had already occurred.”

“We think the minutes support our view that a December rate cut is unlikely, with the next ‘live’ meeting in February.”