No move in official interest rates by the Reserve Bank and it remains on hold, probably in the same position as it was a month ago, judging from the similarities between the statement issued with yesterday’s decision and the one issued on May 6 by Governor Glenn Stevens.
Home owners and other borrowers will be pleased, as will retailers, real estate agents and others whose businesses have taken a pounding from the central bank’s anti-inflation campaign since January.
But as we now know that May 6 statement wasn’t quite the full story and it wasn’t until the minutes for that meeting were issued two weeks later, that we realised the RBA had tossed up whether to lift rates.
That was a big hint that the bank’s previously stated wait and see policy on rates, was up for grabs.
So we have to assume that there was no change in that stance and this will be shown in the meeting’s minutes to be released in 13 days time.
There is a hint of that in the lack of any change in the wording of the key paragraph.
This is what the RBA said yesterday:
"Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation. On balance, the Board’s current assessment is that demand growth will be moderate this year. In the short term, inflation is likely to remain relatively high, but it should decline over time provided demand evolves as expected. Should demand not slow as expected, or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed.
"Weighing up the available domestic and international information, the Board’s judgment is that the current stance of monetary policy remains appropriate for the time being. The Board will continue to evaluate prospects for economic activity and inflation in the light of new information."
This is what was released on May 6:
"Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation. On balance, the Board’s current assessment is that demand growth will remain moderate this year. In the short term, inflation is likely to remain relatively high, but it should decline over time provided demand evolves as expected. Should demand not slow as expected or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed.
"Weighing up the available domestic and international information, the Board’s judgment is that the current stance of monetary policy remains appropriate for the time being. The Board will continue to evaluate prospects for economic activity and inflation in the light of new information."
Perhaps the most significant difference in the two statements was in the depiction of the slowing pace of activity in the domestic economy.
The bank said in yesterday’s statement:
"The evidence is that this is helping to produce a moderation in demand. While labour market conditions to date have remained strong, indicators of household spending have recorded subdued outcomes over recent months, and credit expansion to both households and businesses has weakened significantly."
That is a significant difference to what it said in the May 6 statement on domestic conditions:
"In order to reduce inflation over time, growth in aggregate demand needs to be significantly slower than it was in 2007. Evidence is accumulating that this is occurring. Indicators of household spending have recorded subdued outcomes over recent months, and demand for credit by both households and businesses has weakened."
In its usual style, the bank sends a message by the use of just one or two words.
The bank is a bit more convinced that the slowdown is more real now that it seemed in May because of the slide we have seen in areas like retail sales, building approvals (except for April, but the trend remains downwards), capital spending and business and consumer confidence.
