The RBA held the official cash rate steady at its board meeting in April, a decision which surprised very few people. Given the current state of prices in the cash futures market, there is no material expectation of any rate rises this year and well into 2019.
The release of minutes from the RBA’s latest board meeting may change that. ANZ’s Head of Australian Economics David Plank said normally there was not much to glean from the minutes. He then went on to say, “This is not the case for the April minutes, however.”
The ANZ economist pointed to a sentence in the minutes and its reference to the next move in the official cash rate. “In current circumstances, members agreed that it was more likely that the next move in the cash rate would be up, rather than down.” Various RBA officials have stated a variation of this phrase in several speeches in recent months, so does its presence in the minutes mean anything?
Plank says the expectation of a higher rate in the future is nothing new. “The RBA Governor has been saying as much for some time.” However, he thought the move to the RBA Board’s official records was something else. “But the fact the Board now explicitly acknowledges this is an interesting development.”
Westpac chief economist Bill Evans disagreed. “We do not think that the decision to signal in the minutes that the next move in rates is likely to be up is at all significant. The Governor has made that point on numerous occasions in his own speeches.”