Australia - RBA July meeting minutes due today - preview
More now, this via ANZ:
- We've been asked whether the BoC's actions provide any signal about the likely behaviour of the RBA.
- While there are clearly times when the policy actions of the two central banks are correlated, we don't think the BoC's actions provide a signal about a likely shift in stance by the RBA. For one thing the BoC's rate setting is more stimulatory than the RBA's. We think the RBA's July statement almost went out of its way to emphasise the Bank was on hold.
- We very much doubt the Bank's thinking will change as a consequence of its forecast update for the August Statement of Monetary Policy. The clear slowing in house price inflation since earlier this year lessens any pressure the Bank might feel to tighten for financial stability reasons (and we would also highlight the research we published last week that casts doubt on the benefits of doing so).
- What's more, the Bank's work on household resilience concluded that when "rates begin to rise, the higher debt levels are likely to make spending more responsive to interest rates than was the case in the past." This conclusion lessens any concern the Bank might have about falling behind the curve if it delays the start of a tightening cycle.
- We think the most interesting aspect of the BoC's rate hike, from the RBA's perspective, is that it provides a useful reference point for the impact of rate hikes on highly indebted households and the exchange rate. Determining the impact of both will be inputs into the RBA's thinking about the appropriate policy setting.
(bolding mine for emphasis)