The minutes of the RBA’s October meeting were not expected to be a source of controversy and so it proved when they were released. However, some economists spotted a few of interesting titbits.
Deutsche Bank economist Phil Odonaghoe thought the minutes revealed a divergence in thinking between the RBA and market pricing for short-term interest rates. “We wrote in response to the RBA’s October post-meeting statement that, from the perspective of market pricing, the lack of a more hawkish tone in the statement suggested that the Australian front-end might have gotten a little ahead of itself when it comes to the 2018 outlook. From the minutes released today, it appears the Bank may be seeking to reinforce this view.”
ANZ Head of Australian Economics David Plank highlighted the RBA’s change in language regarding the exchange rate. “For some time the RBA has highlighted that a higher AUD could dampen the outlook for growth and inflation. The Bank has now qualified the required change in the AUD to be a ‘material’ further rise. We think this evolution implies a greater degree of comfort with the gain in the AUD to date.”
Westpac chief economist Bill Evans found it interesting the RBA Board needed to state certain things for the record. “We have always argued that the policy process next year will be dependent on the strength of the domestic economy and not be dictated by any global trend to higher interest rates. It is interesting that the Board has chosen to emphasise this strategy in its minutes.”
Financial markets were largely unmoved. 2 year bonds and 10 year bonds each added 1bps to 2.12% and 2.79% respectively while the Aussie dollar was relatively unchanged against the greenback.