RBA a source of 'stability' amidst banking scandal - Reuters

As reported by Reuters, revelations of misconduct throughout Australia's banking sector poses a risk to housing prices household spending, according to the Reserve Bank of Australia (RBA) in a statement on Tuesday.

Key quotes

"The Reserve Bank of Australia (RBA) inserted a new line in the minutes of its May policy meeting, saying “it would be appropriate to hold the cash rate steady and for the Reserve Bank to be a source of stability and confidence.”

"“Members noted that a further tightening in lending standards in Australia, particularly in the context of the current high level of public scrutiny of banks, was possible, which would affect household borrowing and spending,” the RBA said.

Economists said the central bank may be trying to signal a steady policy path at a time when the quasi-judicial Royal Commission inquiry was unearthing years of malpractice and criminal behavior at the country’s largest financial firms.

“The new comment in the minutes...suggests that the RBA isn’t going to rock the boat by raising interest rates while the Royal Commission is questioning the behavior of the banks,” said Capital Economics chief economist Paul Dales. “The new ‘stability and confidence’ comment implies that the RBA believes it has an extra role to play over and above setting policy according to the economic outlook.” "