Australia | Jun 15 2010
By Rudi Filapek-Vandyck
Due to a technical glitch, the original story published this morning has disappeared somewhere in cyberspace. What follows next is a re-written, shorter, second version.
The Reserve Bank of Australia is firmly on hold as far as the official cash rate is concerned. So much should be obvious after the release of the minutes to the June monetary policy meeting. The overall sentiment as expressed in these minutes are probably best summarised as: we have yet to see what exactly the impact will be on global growth and on sentiment across global financial markets from the deteriorating situation in Europe, hence a wait-and-see approach seems appropriate.
There's one caveat and that is that rising inflation could well change this position, so we all know what will feature high on the RBA's radar in the months ahead.
In addition, the RBA board has directly contacted companies in the domestic retail and property sectors, which led to the following insights:
“Liaison with retailers suggested fairly weak trading conditions more recently, with many retailers noting that significant discounting was occurring.”
“Liaison suggested that financing conditions for firms in the construction sector were improving, though they remained tight.”
The following observation summarises the RBA's stance vis-a-vis international uncertainties:
“Overall, in contrast to the turbulence in financial markets, the recent data on global economic activity had generally been positive and suggested that the global economy was expanding at a relatively firm pace over the first part of 2010.
“It was too early to tell what effect the current turbulence in financial markets would have on the global recovery. It was likely that weaker activity in Europe would have some flow-on effects to the rest of the world through the traditional trade channels, though the more important consideration would be the extent to which the problems in Europe had a sustained effect on global attitudes to risk.
“Offsetting these effects, members observed that the uncertainty surrounding developments in Europe might mean that the process of withdrawing policy stimulus in other parts of the world, including in Asia, would be delayed.”
Translation into everyday English: the RBA has no intention to change the official cash rate. Further international developments, as well as local inflation data, will be watched closely.
