RBA May meeting minutes says Board is monitoring economic, financial developments

Author: Eamonn Sheridan | Category: Central Banks

Reserve Bank of Australia 

  • as package had been introduced only recently, members assessed that the best course of action was to maintain the current policy settings and monitor economic and financial outcomes closely
  •  the labour market was expected to have ongoing spare capacity, and inflation was expected to be below 2 per cent over the following few years
  • board would maintain its efforts to support the economy by keeping funding costs low and credit available to households and businesses
  • plan to accept corporate debt in repos would not have a material impact on the bank's risk profile
  • members agreed that the bank's policy package was working broadly as expected
  • prepared to scale up govt bond purchases again, if necessary, to achieve yield target
  • global recovery could be expected to start later in 2020, supported by both the large fiscal packages and the monetary policy response
  • board determined that it would not increase cash rate until progress made towards full employment and inflation targets

Headlines via Reuters 

Full text here 
More:
  • GDP in Australia's major trading partners was expected to decline significantly over the first half of 2020
  • Australian economy had been severely affected by the imposition of containment measures
  •  Australian GDP was expected to contract by around 10 per cent over the first half of 2020
  •  most of the contraction was expected to occur in the June quarter
  •  an economic contraction of such speed and magnitude would be unprecedented in the 60-year history of Australia's quarterly national accounts
  • preliminary data for March indicated that retail sales had experienced one of the largest monthly increases in the history of the series
  • however, business liaison program suggested that retail sales had fallen in Aprill
  • household consumption was expected to contract by around 15 per cent over the first half of 2020
  • contacts in the liaison program had reported that demand for both new and established housing had fallen
  •  lower incomes and confidence, as well as lower expected population growth, were expected to affect demand for new housing for an extended period
  • liaison contacts had reported that they were taking steps to preserve cash flow, including deferring non-essential investment
  • non-mining business investment was expected to decline significantly; mining investment was likely to be relatively more resilient
  • weak labour market conditions were in turn expected to result in slower wages growth; wage freezes were likely to become more common
  • unemployment rate was expected to peak at around 10 per cent in the June quarter
  •  the covid-19 restrictions were expected to have a very large effect on prices in the June quarter
  •  beyond 1H2020, outlook would depend on how long restrictions on economic activity were in place
Nothing much in this lot that is not already known, a decent summary of where we are at. Not much to inspire confidence on what is ahead. RBA in watching mode, they will do more if needed. 

See here for global coronavirus case data
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