To most outsiders, it all sounds a bit ho
mum.
But tomorrow's meeting of the Reserve Bank
board is shaping up as anything but a dull affair.
While almost every market economist thinks
the RBA will leave rates steady, all eyes will be on any changed language that
could signal the start of a softening up period for a rate rise next year.
The anticipation for even subtle changes or
the removal of key phrases is against the background of 2.5 percent cash rate
for the past 13 months - one of the longest period of rates stability since
1990.
In statements throughout the year, RBA
governor Glenn Stevens has been at pains to signal that the cash rate would
remain low for an extended period and that any change in policy would be
flagged well ahead.
In his September rates statement, Mr Stevens
once again said "the most prudent course" was "likely to be a
period of stability in interest rates".
Source: Reserve Bank of Australia September rates statement |
Tea leave readers who scrutinise the RBA musings, including economist
Annette Beacher of TD Securities, think the RBA is on the brink of preparing
the market for an eventual cash rate increase.
"While we're not there yet, I think the time is coming where 'period
of stability' of interest rates will be dropped from the statement," Ms
Beacher said.
"I think from hereon in with all the discussion of the hot housing
sector, we're wondering how long this period of stability will be in the
statement."
The RBA has also noted that commodity prices " in historical terms
remain high" but this is also likely to change with the iron ore price
down dramatically from mining boom highs at US$79.60 a tonne
"So tomorrow we expect to see 'historically high levels' and 'period
of stability'. Technically that is a cut and paste from recent months but the
risk is that one of those statements is not there," Ms Beacher said.
"So that makes tomorrow's RBA board meeting a must see
event."
Source: Reserve Bank of Australia September rates statement |
Economists will also be watching for commentary on the slowdown in
China's economy, the outlook for earlier than expected rate rises from the US
Federal Reserve and a landscape of geopolitical flashpoints in Syria, Iraq,
Ukraine and Hong Kong.
The steady decline of the Australian dollar - forced in part by rate
cuts of 2.25 percentage points since November 2011 - could also feature
tomorrow.
This morning it was buying 86.63 US cents after hitting a year high of
95.04 in July.
In September, Glenn Stevens said the dollar "remains above most
estimates of its fundamental value".
While the RBA will take comfort from the
recent falls in the currency, economists are expecting the RBA to maintain its
jawboning to force the Australian dollar even lower.
The ramped up interest in the RBA's statement
tomorrow comes amid positive private data out today on inflation and
employment.
The monthly inflation gauge from TD
Securities and the Melbourne Institute shows inflation rose just 0.1 percent in
September after two months of flat results, making 2.2 percent over the year.
The survey says underlying inflation
probably rose 0.5 percent in the September quarter and 2.6 percent over the
year - at the midpoint of the RBA's comfort zone of 2 to 3 percent.
The closely watched ANZ Job Advertisements
series shows job ads in newspapers and on the Internet rose almost one percent
in September - the fourth consecutive monthly rise.
ANZ believes this indicates that the labour
market is gradually improving and that he official jobless rate will stabilise
at just above 6 percent for the next few quarters before decreasing.
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