The Reserve Bank is ready to cut the cash rate if necessary, but it won’t have to if its upbeat outlook for the economy is vindicated.
It would have been a bit too much expecting anything new from the Reserve Bank on Tuesday.
Way too much in fact.
So far this month the central bank had already made an interest rate announcement after its monthly board meeting, and published a 65-page Statement on Monetary Policy.
And its top officials, governor Glenn Stevens, deputy governor Philip Lowe, and assistant governor Christopher Kent, had endured three hours of grilling by a parliamentary committee.
So it was very unlikely that the minutes of the meeting on February 2 would fill in any gaps the RBA had left.
The gist of it was the same.
The RBA said its board had noted that “recent domestic data had, on balance, been positive and that there were reasonable prospects for growth to increase gradually over the forecast period while maintaining inflation close to target”.
And it highlighted the key areas of uncertainty in this outlook.
“Over the period ahead, new information would enable the board to assess whether the recent improvement in labour market conditions was continuing and whether recent financial market turbulence presaged weaker global and domestic demand,” the RBA said.
And it went on to repeat the familiar mantra that the outlook was for continued low inflation, which in turn meant scope for further rate cuts if it turned out that spending needed a boost.
Mr Stevens was even more explicit about a possible cut in his parliamentary testimony on Friday, when he said a rate rise was not likely for the time being, and that the choice – as it had been for several years – was whether or not to cut.
But, with its cautiously upbeat economic outlook, the RBA also made it clear that a cut did not appear to be the most likely option.
This leaves RBA-watchers in a familiar position: waiting for data bearing on the two key uncertainties – financial market turmoil and the local jobs market – to see whether the economic outlook remains on track.
If it does, the RBA may be able to spend the rest of this year on the sidelines, its preferred position, with the cash rate stuck at its record low of two per cent.