The minutes from the RBA’s Board meeting on Melbourne Cup Day have been released.
They show a central bank that is happy with the recovery in the domestic economy, but not so happy with the strong Aussie Dollar.
Just like it said in its recent Statement on Monetary Policy, the RBA thinks monetary policy and very low interest rates are gaining traction and will continue to flow through the economy.
It is almost a direct quote from the SoMP:
There was mounting evidence that monetary policy was supporting activity in interest-sensitive sectors and asset values, and given the lags with which monetary policy operates, the stimulatory effects would likely continue coming through for some time. At the same time, inflation remained within the target and the Australian dollar, while below its level earlier in the year, remained uncomfortably high.
On the Australian dollar’s strength it added: “Members noted that a lower level of the exchange rate would likely be needed to achieve balanced growth in the economy.”
The RBA is in watch and wait mode: It hasn’t “closed off” the possibility of further cuts — but it is clear it is comfortable where it is at the moment, and rates will be on hold for some time.