From Peter Martin:
While it’s always technically true that the board’s decisions are made by those sitting around the table, most of the time they go into the meeting having a fair idea of what they’ll decide.
Not this time. For once, every good argument for cutting rates is balanced by a good one for staying put. If I were having a bet on the outcome, I would make it a small one.
PM is very well informed so take this as semi-official guidance. Today’s RBA meeting really is only about one thing. The dollar is not a consideration for the bank at this point. Inflation is not a consideration, either. The rate of growth and unemployment are the key factors.
Given the only part of the economy with any momentum is house prices and residential construction, and that both had until very recently been overheating in eastern states presenting a financial stability risk, the key question is has macroprudenital policy slowed house prices enough to mitigate financial risk while not slowing so far that they represent a drag on growth?
The RBA cannot answer that question at this juncture so my guess is they will wait but PM is right that it is a close call and as I learned in the first half of the year when a central bank becomes a bubble manager then gauging specific meetings becomes very difficult even if it remains obvious that rates will fall further.
After all, do you know if Glenn Stevens got lucky this morning?
