RBA Minutes: Policy would need to remain highly accommodative to reach full employment

The minutes of the June 2021 Monetary Policy Meeting of the Reserve Bank has been released. 

Traders were looking for any anticipation about where the discussion about tweaking QE in July is heading.

RBA minutes

Board agreed it would be "premature to consider ceasing" the bond-buying programme.
Policy would need to remain highly accommodative to reach full employment.
Bond buying underpinned accommodative conditions necessary for economic recovery.
Return to a tight labour market, actual inflation in target band unlikely until 2024 at earliest.
Options for bond programme included another round of a$100 bln, scaling back purchases, spreading them out.
Also discussed approach of reviewing bond purchases more frequently depending on flow of data.
Australian economy transitioning from recovery to expansion.
Annual wage growth would need to be sustainably above 3% for inflation to reach target.
Members expected only gradual pick up in wages growth over following few years.
Possible participation rate could rise further, still a pool of workers available.
Liaison showed some firms favoured non-wage measures to attract labour, or to ration output.
Household spending to be strong, supported by rising wealth, employment and lower uncertainty.
A$ in narrow range despite significant increases in some commodity prices.
Monetary policy had contributed to a$ being lower than otherwise.
RBA board discussed climate change, its impact on cost and availability of funding in Australia.

AUD/USD is softer on the release which leaves GBP and EUR crosses in good stead towards their targets and higher highs on the hourly time frames as follows:

• GBP/AUD Price Analysis: Bulls stepping in ahead of RBA minutes

• EUR/AUD Price Analysis: Bulls seek continuation through hourly resistance

Thursday’s jobs data for the month of May in Australia will be a more important event this week ahead of the 9 July Reserve Bank of Australia meeting.

A solid headline print if say, 45k, which is likely above consensus along with a drop in the Unemployment Rate from 5.5% to 5.4% or lower would be highly encouraging and potentially see the RBA make changes to the shape and/or size of the QE will be unveiled as it brightens the inflation outlook for 2Q after the underwhelming 1Q read.

The RBA Governor, Philip Lowe, will also deliver a speech on Thursday.

However, he is scheduled to speak before the release of the jobs report so there may not be any relevant policy comments. 

About the RBA minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.