Thursday, June 23 2011
Below is from the minutes for the RBA. This sounds like a move to a neutral rate setting. Many strategists are still fearing rate rises. This should be good for the domestic economy and ease some of the pressure.
“Members considered that the medium-term outlook for the economy was broadly as discussed at the May meeting. While inflation was currently in the bottom half of the target range in underlying terms, this had been partly due to the disinflationary effects of the appreciation of the exchange rate and the earlier moderation in labour costs. If the economy evolved in line with the staff forecasts, GDP growth would be somewhat above trend over the next few years, led by growth in the resources sector. A gradual pick-up in inflation could be expected under this scenario.
This outlook suggested that further tightening in monetary policy would be necessary at some point. Members considered, however, that the flow of data over the past month had not added any urgency to the need for an adjustment to policy. While there had been additional evidence of the coming strong pick-up in investment in the resources sector, activity remained quite subdued in some other important parts of the economy, partly reflecting the Board’s earlier actions as well as the appreciation of the exchange rate. Credit growth remained quite moderate and asset prices had softened. In addition, the global activity data had been somewhat softer and downside risks to the international economy had become a little more prominent over the past month, especially in the case of sovereign debt problems in Europe. Accordingly, members judged that it would be prudent to leave the stance of policy unchanged, pending further data on international developments and on the strength of domestic demand and inflationary pressures. They therefore considered that the current monetary policy setting was appropriate.”
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