It’s going to be another long two weeks for RBA-watchers.
The central bank vindicated expectations on Tuesday by leaving its benchmark cash rate at 2.5 per cent.
But the statement issued after the RBA board’s monthly monetary policy meeting was standard fare.
The economy is running “a bit below trend” and will likely continue in that vein “in the near term”, with unemployment edging higher, the central bank said.
Household and business sentiment has improved, there are signs of increased demand by households for finance, and investment patterns have shifted towards riskier assets with housing and share prices rising, the RBA said.
That’s just what the RBA wants, but it’s unsure of the pace and extent of these responses.
“Further ahead, private demand outside the mining sector is expected to increase at a faster pace, though considerable uncertainty surrounds this outlook,” the RBA said.
Part of that uncertainty is related to the Australian dollar, which the RBA described – for the first time – as “uncomfortably high”.
That high degree of uncertainty and the RBA’s clearly mounting frustration with the high exchange rate means it’s not possible to say it has ruled out further cuts in the cash rate.
Or to forecast – with any confidence – the beginning of a return to more familiar levels in the coming few months.
The conclusion to the statement on Tuesday was not helpful in this regard – it was as bland and uninformative as these statement ever are.
“At today’s meeting, the Board judged that the setting of monetary policy remained appropriate,” the RBA said.
“The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target.”
But there is a legitimate expectation that the outlook will soon be clarified.
The latest rate cut was in August, when the RBA moved cash down from 2.75 per cent to its current 2.5 per cent.
In that month, and in September and October, the post-meeting announcement ended with a comment as non-committal as Tuesday’s.
But the minutes of each of those meetings, released with the normal two-week delay, pointedly added a clarification along the lines that the RBA neither intended to signal an intention to lower the cash rate in the near term nor wanted to rule out a move later on.
So the focus now will be on whether the minutes of Tuesday’s meeting, to be released two weeks later, on Tuesday, 19 November, will do the same.
If not, then a rate cut will rightly be seen as much less likely.
It is possible that the RBA may use the quarterly monetary policy statement on Friday to clarify the outlook.
But it didn’t do that in August, choosing to use the minutes instead, and seems likely to do the same this time as well.
So RBA-watchers will now settle in for a two-week wait.