The February Board minutes contained few surprises given the release of the quarterly Statement on Monetary Policy(SMP) at the beginning of February. The RBA’s “neutral” policy bias was again evident in the wording that “the mostprudent course would likely be a period of stability in interest rates”.The general tone in the February Board minutes is that the RBA is a little more relaxed about growth prospects (both athome and abroad) and a little less comfortable with the inflation outlook. The RBA noted that there are several possibleexplanations for the higher-than-expected QIV CPI. There could be an element of “noise” that occurs in economic data,the pass-through from a lower exchange rate could be occurring more quickly than usual, the pass-through from slowwages growth may be occurring more slowly than usual or there may be less spare capacity in the economy thanpreviously thought. It is likely that it is a combination of all of these factors at work.
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Commonwealth Bank