As expected, the RBA left the cash rate unchanged at 4.75% for a 4th meeting as policymakers view the current monetary stance is 'mildly restrictive' and 'appropriate'...
As expected, the RBA left the cash rate unchanged at 4.75% for a 4th meeting as policymakers view the current monetary stance is 'mildly restrictive' and 'appropriate'. The accompanying statement is almost the same as the previous one, signaling little has changed since the March meeting. The RBA stated that the floods hit Queensland over the summer 'have reduced output and the resumption of coal production in flooded mines is taking longer than initially expected'. Concerning the situation in Japan, the central bank believed it will have 'a noticeable effect on Japanese production in the near term, although the impact on the broader Asian region is expected to be limited'.
Same as the March meeting, the RBA there continues to be 'caution in spending and borrowing, and a higher rate of saving out of current income'. The floods over the summer 'have reduced output' and it is taking 'longer than expected' for resumption of coal production in flooded mines. However, the central bank expects production levels should recover over the months ahead. Policymakers acknowledged that growth in employment has 'moderated' with the jobless rates staying steady at 5%. As suggested by most leading indicators, growth in employment will continue but the pace will be slower than in 2010.
Concerning inflation, commodity prices, including oil prices, have risen over recent months, pushing up measures of consumer price inflation in many countries. While most central banks have been moving to tightening monetary policies, the overall picture remains accommodative. The RBA views inflation is 'consistent with the medium-term objective of monetary policy' and the moderate outcomes are being assisted by the 'high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices'. Looking beyond temporary effects, Australia's inflation over the year ahead will be consistent with the 2-3% target.
At the concluding paragraph, the RBA stated that the current monetary stance is 'mildly restrictive' and 'appropriate' in view of the general macroeconomic outlook. Further monetary decisions will depend on economic data and we retain our view that the RBA will leave interest rates unchanged until 3Q11 before resuming tightening.
