RBA February minutes released
(22 February 2012 – Australia) The minutes of the Reserve Bank of Australia (RBA)’s February meeting show it is in no hurry to cut rates.
At the meeting the central bank chose to keep rates unchanged at 4.25 percent, but said it has scope to ease policy if demand were to "weaken materially".
"While the financial situation in Europe remained fragile, the likelihood of an extremely bad outcome seemed to have diminished somewhat," the minutes showed.
"With growth expected to be close to trend and inflation consistent with the target, the board considered that this setting was appropriate for the overall macroeconomic outlook."
RBA Governor Glenn Stevens and his board noted in today's minutes that the cuts "had been passed through to most lending rates in the economy, which were now around average levels."
Since its decision, the "big four" had raised standard variable mortgage rates independently from the RBA, although in the minutes it was mentioned that competition for deposits, recent covered bond sales and the cost of swapping funds raised offshore into Australian dollars added to the price lenders paid to raise money.
"Collectively, these developments had increased banks' overall cost of funding relative to the cash rate and had narrowed the difference between banks' lending rates and funding costs," policy makers said in the minutes.
"Members observed that it appeared that additional demand for labor had been met largely through existing employees working longer hours over the past year, rather than through an increase in hiring," the minutes showed.
The RBA this month lowered its forecasts for growth and inflation. It sees average growth of 3.5 percent in 2012, down from its November 4 estimate of 4 percent. Consumer prices will rise 3 percent in the year through to the fourth quarter, less than a previous prediction of 3.25 percent, the central bank said, while underlying inflation is predicted to be unchanged at 2.75 percent.
"Global economic and financial market developments had been somewhat more positive over the past month or so," policy makers said in today's minutes. "Whereas the situation had been looking quite negative in early December, recent actions by the European Central Bank and euro-area governments had boosted confidence."
"While the financial situation in Europe remained fragile, the likelihood of an extremely bad outcome seemed to have diminished somewhat," the minutes showed.
"With growth expected to be close to trend and inflation consistent with the target, the board considered that this setting was appropriate for the overall macroeconomic outlook."
RBA Governor Glenn Stevens and his board noted in today's minutes that the cuts "had been passed through to most lending rates in the economy, which were now around average levels."
Since its decision, the "big four" had raised standard variable mortgage rates independently from the RBA, although in the minutes it was mentioned that competition for deposits, recent covered bond sales and the cost of swapping funds raised offshore into Australian dollars added to the price lenders paid to raise money.
"Collectively, these developments had increased banks' overall cost of funding relative to the cash rate and had narrowed the difference between banks' lending rates and funding costs," policy makers said in the minutes.
"Members observed that it appeared that additional demand for labor had been met largely through existing employees working longer hours over the past year, rather than through an increase in hiring," the minutes showed.
The RBA this month lowered its forecasts for growth and inflation. It sees average growth of 3.5 percent in 2012, down from its November 4 estimate of 4 percent. Consumer prices will rise 3 percent in the year through to the fourth quarter, less than a previous prediction of 3.25 percent, the central bank said, while underlying inflation is predicted to be unchanged at 2.75 percent.
"Global economic and financial market developments had been somewhat more positive over the past month or so," policy makers said in today's minutes. "Whereas the situation had been looking quite negative in early December, recent actions by the European Central Bank and euro-area governments had boosted confidence."
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