- The board noted conditions in some emerging markets had become more unsettled
- Reasonable prospects that growth in major trading partners would pick up in 2014
- Possible household consumption could outpace income thanks to house, equity prices
- Liaison suggested retail sales through Christmas were reasonably good
- Recent data more positive on consumption, home building, business conditions and exports
- The board recognised that labour market conditions tended to lag economic growth
- Leading indicators of employment had stabilised, but pointed to only moderate growth
- Lower AUD, if sustained, would be expansionary for economy
- Inflation puzzle could also reflect lower AUD, lag in impact from slower wages
- The board felt Q4 inflation figures likely contained ‘some noise’ as well as signal
- The board saw further signs policy stimulus was having its intended effects
- Period of stability in interest rates likely most prudent course
Headlines via Reuters
Full text is here Minutes of the February 2014 Monetary Policy Meeting of the Reserve Bank Board
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AUD had an immediate dip to sub 0.9020 but instantly back higher (if you are looking for a definition of ‘whipsaw’ … look no more) to run into offers around 0.9060. If it sustains around 0.9060 then the stops above will come into target.
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Interesting comment on the ‘puzzle’ facing the RBA re inflation …
The Board noted that it was likely the inflation reading contained some noise as well as some signal about inflationary pressures, but also presented something of a puzzle in interpreting the mix of activity and price data.
The RBA are not afraid to admit they are puzzled by the inflation developments … They don’t pretend to be all-knowing.
Overall, nothing much we didn’t already know in these minutes.