Friday, August 14, 2009
From Annette Beacher at TD Securites:
· The RBA Governor doesn’t seem to be discouraging the markets from pricing in higher cash rates.
· The emphasis of removing the “emergency” setting of the cash rate was emphasized and re-emphasized.
· Clearly the next move is up, and the Governor suggested that even if GDP falters, the “emergency” rate is increasingly no longer required.
· While coy about timing, there is no doubt that at this point in time the Governor is looking to withdraw the extraordinarily stimulus in the economy.
A few key answers from the Governor – excuse the shorthand (typing as he speaks):
· Australian economic growth could be patchy, cannot rule out “a negative quarter or two of GDP”. [Surprised some market participants, but the Governor clearly has considered all options].
· Will reduce the monetary accommodation “when the time is right”. Apologizes for being “coy” about answering exactly on the issue of “timing”.
· Not surprised Australian cash rates are higher given Australia’s economic outperformance compared with most other countries.
· Referred to better than expected labour market response to the slowdown, but acknowledged while there are reduced hours worked still means “debt can be serviced”.
· Economy is in “Better shape than would have feared”.
· If cash rates are “too low for too long” the imbalances generated will not help the economy; aiming for balanced growth.
· Not tightening monetary policy “right now”, but the time will come to “lift rates off the bottom”.
· Cash rates set at an “emergency setting, lowest in 40 years, placed to cushion real risks of sharp recession”.
· At some point “need to move away from the emergency setting” as “the emergency has passed”.
· The pace of removing the emergency accommodative cash rate is “yet to be decided”.
His opening statement is here.
I'm twittering on the answers here.