RBA Minutes: Policy still little restrictive but difficult to determine
The Reserve Bank of Australia (RBA) published the Minutes of its September monetary policy meeting on Tuesday, which showed that board members agreed that policy still little restrictive but difficult to determine.
Additional takeaways
Increase in housing prices, loans indicated past rate cuts were having an impact.
Considerable uncertainty about global outlook, US tariffs, China economy.
Labour market still a little tight, forward indicators steady.
Economic risks remain, consumption could be stronger with softer jobs and wages.
Board observed services inflation proving resistant in other developed nations.
AUD close to estimates of equilibrium level given terms of trade, yield differentials.
Monthly CPI readings housing, services suggest Q3 inflation could be above forecast.
Data liaison suggested recovery in household consumption likely to persist.Policy still little restrictive but difficult to determine.
Saw risk private sector wage growth could ease a little faster than expected.
Important to see what q3 data revealed on economy, supply capacity.
Some time before full impact of previous easing would be felt
Market reaction
At the time of press, the AUD/USD pair was up 0.06% on the day at 0.6518.
(This story was corrected on October 14 at 03:51 GMT to say that the RBA published the Minutes of its September monetary policy meeting, not October.)
Australian Dollar Price Last 7 Days
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies last 7 days. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.33% | 1.14% | 1.50% | 0.66% | 1.45% | 2.08% | 1.14% | |
| EUR | -1.33% | -0.20% | 0.18% | -0.67% | 0.13% | 0.73% | -0.08% | |
| GBP | -1.14% | 0.20% | 0.37% | -0.48% | 0.37% | 0.89% | 0.12% | |
| JPY | -1.50% | -0.18% | -0.37% | -0.81% | -0.00% | 0.48% | -0.37% | |
| CAD | -0.66% | 0.67% | 0.48% | 0.81% | 0.78% | 1.38% | 0.60% | |
| AUD | -1.45% | -0.13% | -0.37% | 0.00% | -0.78% | 0.45% | -0.26% | |
| NZD | -2.08% | -0.73% | -0.89% | -0.48% | -1.38% | -0.45% | -0.86% | |
| CHF | -1.14% | 0.08% | -0.12% | 0.37% | -0.60% | 0.26% | 0.86% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section was published on Monday at 22:24 GMT as a preview of RBA Meeting Minutes.
RBA Meeting Minutes overview
The Meeting Minutes from the Reserve Bank of Australia’s (RBA) latest interest rate decision will be published early on Tuesday, at 00:30 GMT. The RBA held its cash rate at 3.6% at its latest rate call, staggering a series of rate cuts that began in February of this year.
The finer details of the RBA’s internal discussions surrounding its latest interest rate decision could help traders make a more accurate guess of when the Australian central bank will shift rates again, and investors will be looking for signs of how confident (or apprehensive) the RBA is about the Australian economy.
How could the RBA Meeting Minutes impact AUD/USD?
The pace of the RBA’s interest rate decisions directly affects global Australian Dollar (AUD) flows, and the policy convergence or divergence between the RBA and the Federal Reserve (Fed) is a foundational rate-setting tool for the Aussie’s market value. If the RBA’s internal dialogue is more hawkish or dovish compared to what investors have been expecting, it could see early shifts in the AUD as markets prepare for upcoming rate adjustments.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Author
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
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