The RBA held the official cash rate steady at its board meeting in July, as it had for every meeting since the cash rate was reduced in August 2016. So far, the RBA has not shown any indication it is about to take the same path at the US Fed, although it has indicated the next rate change is likely to be an increase.
Prior to the release of the minutes, speculation had centred on the RBA’s view of the forces driving the recent increase in short-term funding costs. BBSW increased from around 1.80% at the end of March to over 2.10% in June and it is currently just over 2.00%. As BBSW is the benchmark for interest rates on billions of dollars of loans and other financial instruments, its recent increase in the absence of higher official interest rate rises has provoked some discussion as to forces involved.
As it turned out, the RBA minutes added very little to the “other factors” reference made in the media release immediately after the July Board meeting. However, Westpac senior economist Matthew Hassan said the prominence given to statements regarding mortgage rates suggest “the Bank is not overly concerned about the current situation” in the wholesale market where BBSW is set and he was looking “forward to a fuller assessment in the RBA’s August Statement on Monetary Policy.”