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RBA monetary policy meeting minutes continue dovish bias

Written by Sam Coxhead on March 20th, 2012.      0 comments

11:37 AM (AEST) The just released RBA monetary policy meeting minutes continue to be measured in their wording. Following two meetings of leaving the cash unchanged at 4.25%, the risks remained skewed to the downside. The focus has moved from the potential of a financial shock from Greece to the lower Euro-zone demand affecting economic conditions in east Asia. A lower expectation of activity in east Asia will materially affect demand for commodities, the core of Australian exports.

A link to the full minutes at the RBA website is here : RBA minutes.
The one paragraph that I found particularly interesting was this one :

"The clearest downside risk to the outlook for Australia remained a sudden worsening in the situation in Europe and its flow-on effects to the rest of the world through trade, financial and confidence channels. Members noted that a sharp slowdown, particularly in east Asia, would have significant implications for commodity prices and demand for Australian exports. A major flight from risk in global capital markets would see significant changes in credit conditions, the exchange rate and confidence. So long as inflation remained well contained, there would be ample scope for the Bank to ease policy in such a scenario. Overall, members noted that while this downside risk could still materialise, this seemed somewhat less likely than a few months ago."

The Australian dollar was unmoved by the release of the minutes as the markets takes from it that further evidence is needed to warrant a cut from the present 4.25% cash rate.