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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

The release of the Reserve Bank minutes normally sparks some movement in financial markets, but last week markets barely budged. This is because market attention was clearly focussed on the twin US and Japanese central bank meetings later in the week. The RBA minutes contained the usual lines about property markets not posing any serious risks to the economy, and the comment that a “higher than we would like Aussie dollar has the potential to derail the transition into the service industries” – sounding like a broken record.

The new RBA Governor Philip Lowe addressed the House of Representatives Standing Committee on Economics last Thursday, where he commented that the RBA won’t be overly strict in enacting policy around its 2% to 3% inflation target. Mr Lowe pointed to the fact that inflation remains entrenched below the desired target, but added that trying to get inflation back into the band too quickly might have consequences for financial stability. Markets have perceived the comment to suggest the RBA is comfortably in a wait-and-see mode and unwinding (or delaying) possible further rate cuts.

But with rates cut twice already this year as inflation has surprised to the downside, a slight easing bias remains in place for now.

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Source: Rural Bank

 

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