RBA minutes: Gradual approach to policy - Westpac

Bill Evans, Research Analyst at Westpac, explains that the latest Reserve Bank Board Minutes emphasise on gradual approach to policy with a hint of increasing uncertainty.

Key Quotes

“The minutes of the monetary policy meeting of the Reserve Bank Board for April contained few surprises.”

“Arguably of most interest was the inclusion of “in current circumstances, members agreed that is was more likely that the next move in the cash rate would be up rather than down”. Our analysis indicates that this is the first time in this cycle that the minutes have included that observation. The theme comes as no surprise given that we have seen the Governor make reference to that balance of risks on numerous occasions in his own speeches.”

“The commentary around the labour market appears to be a little more reserved than we have seen in previous minutes.”

“Recent commentary from the Bank has left us a little confused as to its growth outlook. In the Governor’s statement following this Board meeting he noted that growth in 2018 would be higher than 2017 (2.4%). In today’s minutes, growth “was expected to exceed potential growth”. The Bank has been on record in the past assessing potential growth as 2.75%. We will see the resolution to this puzzle on May 4 with the May Statement on Monetary Policy. It is most likely that the Bank will lower its growth forecast for 2018 from 3 ¼ per cent to 3 per cent.”


  • 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.
  • There appears to be a less euphoric assessment of the labour market, while hints that the growth forecast will be lowered are clear. Developments in financial markets associated with tightening global liquidity are noted but no implication is offered. Prospects for further falls in house prices, particularly in Sydney, are certainly considered.
  • While the RBA’s rate outlook is consistent with their forecasts, the risks to that outlook continue to accumulate. Emphasising that progress towards lower unemployment and higher inflation will “be only gradual” appears to be a clear signal that the Bank is undecided at this point and will require quite some time before it can be confident with its view.
  • Westpac continues to expect that rates will be on hold for the remainder of 2018.” 


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