A good wrap-up from the Wall Street Journal (ungated). In summary:
- In its Statement on Monetary Policy the Reserve Bank of Australia has subtly altered its language, no longer saying that benign inflation gave it “scope” to cut further, but that rates will be adjusted “as needed”.
- This altered language is a signal that policy makers are growing confident about Australia’s economy over the medium term.
- The RBA will not be on hold as they let previous cuts work their way through the economy and wait for signs of recovery to become more apparent.
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It appears to me that the future path for interest rates in Australia is, as always, data-dependent. If the ‘transition’ (from mining investment to other sectors of the economy) slows, or does not produce economic growth sufficient to propel employment gains then its back to the chopping board for the bank (inflation allowing, of course)
