According to the minutes of its March 7 meeting, the Reserve Bank is close to hitting the ‘P for pause’ button on its monetary policy lever.
And for a while yesterday that helped the ASX remain buoyant after a reasonable night’s trading offshore as bank fears eased and central banks started flooding world markets with US dollars.
The ASX 200 peaked at 6,992 just after the release of the minutes were released around 11.30 am. But the confidence faded slowly in afternoon trading and the index ended 57 points higher at 6,955, but that was a long way from the peak of 6,992.
Investors took the minutes as putting an end for the time being, to the succession of 10 rate rises in the past year.
The minutes, show the RBA board members acknowledging that the “economic outlook was uncertain”, and monetary policy was now restrictive.
“Members agreed to reconsider the case for a pause at the following meeting, recognising that pausing would allow additional time to reassess the outlook for the economy,” the minutes from the March 7 meeting said.
“The considerations meant it would be appropriate at some point to hold the cash rate steady to assess more fully the effect of interest rate increases to date.”
The minutes show RBA board members noted conflicting signals about the strength of the Australian economy and the pressures under-pinning high inflation.
The minutes support RBA Governor, Philip Lowe’s big post meeting hint that a pause in rate rises could be around the corner.
In a speech following the decision to impose a 10th rise in the official cash rate, Dr Philip Lowe said the “more recent rate increases” had moved interest rates into restrictive territory, which is where monetary policy is high enough to slow growth in the economy.
After the March increase, the cash rate is now at 3.6%.
The March 7 RBA meeting was well before the bank crisis erupted in the US on March 9 and even if the US Federal Reserve lifts its key rate overnight tonight (WED), the bank jitters will be enough to see the RBA sit pat at its pre-Easter meeting.
But offsetting that is the very strong labour force data for February, which was skewed by thousands of people starting work (who in January helped boost job losses as they were classed as being unemployed but waiting to start work). The 65,000 new jobs in February saw the jobless rate ease to 3.5% from 3.7% in January.
That confusion will await some clarification in March and April and that could help the RBA justify a pause to see just hw strong the labour market really is.
