Craig James can detect a note of restrained glee in the Bank's account of today's board meeting:
"It’s always hard to glean sentiment from the urbane Reserve Bank, but you can sense some underlying excitement or sense of achievement in the latest statement.
In fact the statement should be entitled: “Its working!” In recent months the Reserve Bank appeared unsure whether it had done enough to slow the economy and address inflationary pressures. But there is a clear change in attitude.
In previous statements the Reserve Bank has given veiled warnings that rates may have to rise again if demand didn’t slow. But the threats are gone. The Reserve Bank says the combination of interest rate hikes, tougher credit standards and rising living costs are slowing the economy to a more sustainable pace.
Does the Reserve Bank Governor get excited? This statement suggests he does, because there is a tone of restrained glee in the acknowledgement that policy is working...
The Reserve Bank has signalled that it may be prepared to look through the next inflation result. Even if the result is high, the Reserve Bank has signalled that it may stay on the interest rate sidelines. The Reserve Bank is keenly aware that the economy can’t be turned on a dime. Slower growth will lead to slower inflation outcomes, but the process takes time.
The Reserve Bank is signalling that it has done enough. While the risk of another rate hike exists, the Reserve Bank now appears to be leaning in favour of keeping rates on hold over the remainder of 2008."