On Hold, Continuity Under New Governor

The RBA left rates unchanged at 4.1% for the fourth consecutive meeting. This was Michele Bullock’s first meeting as Governor and the little changed statement says something in itself - for now it is business as usual at the Reserve Bank. By choosing the Deputy Governor to replace Philip Lowe continuity appears to have been preserved. The Board retained its tightening bias and so has kept its options open for the November 7 decision given updated forecasts and Q3 CPI due on October 25.

• There were even fewer changes in the October meeting statement than in September. Again the guidance paragraph was unchanged and the Board continues to be data and forecast dependent. The reasons for the unchanged cash rate remained the material tightening to date and time to assess its impact given uncertainty and lags.
• In terms of inflation, the RBA reiterated that it had peaked. There were some additions to this paragraph with it noting that while goods inflation had “eased further”, “many services are continuing to rise briskly”. Fuel prices were mentioned in the September minutes but this month they appeared in the statement having “risen noticeably”. Q3 CPI will include more details on these components and signal any early second round effects from higher fuel prices.
• Another addition was the recognition that H1 growth had been stronger than projected but the RBA still expects it to be below trend. Concerns re China’s economic outlook remain, and household consumption and dwelling investment are still expected to be weak.
• The minutes scheduled for October 17 will be watched closely for the breakdown of the discussion and whether it included a 25bp hike.
• See RBA meeting statement here. There are no imminent RBA speakers with Governor Bullock not speaking until October 18.