RBA rate hike in December highly unlikely after release of minutes.
Good morning.
The RBA have released minutes from the November Board meeting and they have sent a clear message that a pause is the most likely outcome at the next meeting on 1 December.
Here is a link to the minutes,
Here are some extracts from the minutes, that add to the pause debate.
November minutes. ( Consideration For Monetary Policy. )
"Looking ahead, members expected that if economic conditions evolved as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question."
By comparison, the RBA was point blank a month earlier, leaving a clear message that a rate hike in November would occur.
October minutes ( Consideration For Monetary Policy. )
"This meant that the balance of risks was now such that the current very expansionary setting of policy was no longer necessary, and possibly imprudent."
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The RBA is required to be transparent in their outlook for monetary policy, and the remarkable change of view from the October meeting to last month cannot be ignored.
Having said in October, that the expansionary setting was no longer necessary, and possibility imprudent. They followed up with a 25 point hike in November, taking the cash rate to 3.5%.
One month later they have taken a backward rhetorical step, and have qualified their intentions. Further gradual adjustment would most likely be appropriate over time, although the pace remains an open question is far removed from having a setting of policy that was no longer necessary and possibly imprudent.
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There are many other hints in this month's minutes, but the the message in the final paragraph has purpose and intention.
Looking ahead the next rate hike is likely in February 2010, as there is no scheduled meeting in January. At this early point, that rate hike is expected to be 25 points.
With kind regards
John Craig
Phone: (612) 8243 3526
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