Reserve Bank of Australia

February 5, 2013

The Board’s view is that with inflation likely to be consistent with the target, and with growth likely to be a little below trend over the coming year, an accommodative stance of monetary policy is appropriate. The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand.

Thus did RBA officials in a new statement released today by Governor Stevens signal that monetary easing may not be over.  Six cuts of 25 basis points each were made to the Official Cash Rate between November 2011 and December 2012.  As per custom, the Board did not meet in January.  They meet in all 11 other months of the year, however.  The present rate level following December’s reduction is 3.0%.  The statement from Glenn Stevens observes

  • Global growth somewhat below trend.
  • Lessened global financial strains but fiscal consolidation still needed in many places.
  • Resource sector investment, the main engine of growth, nearing a peak and thus a need for other sources of demand to step up.
  • Headline CPI and underlying measures at around 2ΒΌ per cent, which is closer to the target floor than ceiling.
  • “The exchange rate remains higher than might have been expected, given the observed decline in export prices, and the demand for credit is low, as some households and firms continue to seek lower debt levels.”

This statement met analyst expectationsA rate cut this soon had not been forecast, but many thought the post-meeting statement would be utilized to prepare markets for the possibility of a cut within a few months.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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