On Wednesday, Reserve Bank of Australia (RBA) announced changes to how it adjusts the official cash rate (OCR). Among the changes, the number of scheduled meetings will be slimmed down to eight from 11, starting February 2024.
Four of the meetings will be on the first Tuesday of February, May, August and November, while the remaining four meetings will be held midway between these meetings.
Interest rate decisions will still be released at 2.30pm and a press conference will be held at 3.30pm after each meeting.
The below note from CBA’s economics team explains the changes, which are largely a ‘nothingburger’ but positive at the margin.
Changes to the operation of the RBA
The Reserve Bank Governor has outlined the RBA’s response to the recent Review of the RBA. Significant changes to the operation of the RBA were recommended by the Review and some of these changes will now begin in early 2024.
The key changes will be to move to 8 meetings a year, rather than the current 11, with meetings to be held on the first Tuesday of February, May, August and November (as is currently the case), with the remaining four meetings to be held mid-way between those meetings.
In addition, the statement of the decision on monetary policy at each meeting will be signed by the Board, not the Governor. Monetary policy decisions will still be announced at 2.30pm on the day of the Board meeting, with a press conference by the Governor at 3.30pm on the same day.
Importantly, the quarterly Statement on Monetary Policy (SMP) will now be released on the same day as the Board meeting, rather than the following Friday.
Together, the press conference and the earlier release of the SMP will give economists, market participants, the media and all interested Australians more detail on the reasons for the policy decisions made at the Board meeting and the outlook.
We see these changes as a positive development and welcome the increase in information and detail.
In his speech Wednesday, the Governor outlined ten major changes to the operation of the RBA, as follows:
1) “From 2024, the Board will meet eight times a year, rather than 11 times as is currently the case. Four of the meetings will be on the first Tuesday of February, May, August and November. The other four meetings will be held midway between these meetings. The exact dates for 2024 will be published soon and the dates for future years will be published well in advance”.
2) “The Board meetings will be longer than is currently the case. They will typically start on the Monday afternoon and then continue on the Tuesday morning. The outcome of the meeting will be announced at 2.30pm on the second day, typically a Tuesday, as is the case now”.
3) “All Board members will have the opportunity to attend an internal staff meeting some time before the Board meeting. This will allow them to hear directly from, and ask questions of, a broader range of staff”.
4) “The post-meeting statement announcing the decision will be issued by the Board, not, as is currently the case, the Governor”.
5) “The Governor will hold a media conference after each Board meeting to explain the decision. The media conference is expected to be held at 3.30pm”.
6) “The quarterly Statement on Monetary Policywill be released at the same time as the outcome of the Board meeting (in February, May, August and November), rather than on the following Friday as is currently the case. Given this and other changes, we are reviewing the structure of this document”.
7) “The Board, rather than just the Governor, will be the signatory to the Statement on the Conduct of Monetary Policy, which is the document that records the common understanding on monetary policy between the RBA and the Australian Government. The new Statement is expected to be finalised later this year”
8) “The Board will oversee the Bank’s research agenda as it relates to monetary policy and aspects of financial stability”
9) “The Bank will continue with its current approach to climate change analysis, focusing on the implications of climate change for the economy, inflation and the financial system”.
10) “The Board will work with the Treasury to undertake five-yearly open and transparent reviews of the monetary policy framework”.
In addition, the Governor stated that there were also other changes to the operation of the RBA that would best be considered after the legislative changes needed to the Reserve Bank Act are put in place and the new Monetary Policy Board is established. These changes include:
- The publication of an unattributed vote count.
- All Board members making regular public appearances to discuss their thinking and decisions on monetary policy.
- The establishment of an expert advisory group to engage with the Board
- The Board papers being published with a five year lag.
As noted, we welcome the changes to the operations of the RBA announced Wednesday.
An increase in transparency, communications and detail around policy decisions and the outlook will be helpful to better understand and forecast monetary policy and the broader Australian economy.
