RBA Minutes: Accommodative approach as long as needed

• RBA minutes show that Australia's central bank does not see a need to further ease policy.
• Members noted that the downturn had not been as severe as earlier expected.
• AUD tucked in below a fresh high pertaining to USD weakness but was little changed on the minutes.

Having slashed rates in an emergency meeting in March At its Aug.4 policy meeting, the Reserve Bank of Australia (RBA) held its cash rate at a record low of 0.25% in an expected decision.

The Reserve Bank of Australia's August meeting minutes have been released and headlines are coming through as follows:

RBA minutes

Australia's central bank does not see a need to further ease policy for now as its package of measures were working "broadly as expected" with an economic recovery underway in most of the country, minutes of its August policy meeting showed on Tuesday, Reuters reports.

"Members reaffirmed that there was no need to adjust the package of measures in Australia in the current environment," the minutes showed.

"Members agreed, however, to continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted."

Key notes

• The target for three-year yields to be maintained until progress made towards full employment, inflation.
•  The accommodative approach will be maintained for as long as necessary.
•  Members noted that the downturn had not been as severe as earlier expected.
•  Likely that fiscal and monetary support would be required for some time.
•  Members noted a recovery was underway in most of Australia.
• The recovery was, however, likely to be slower than earlier expected, with the COVID-19 outbreak in victoria having a major impact on the economy.
• The board welcomed the government's announcement that various income support measures would be extended.
• uncertainty about the health situation and the future path of the economy was continuing to affect the spending plans of many households and businesses.
• No need to adjust the package of measures in Australia in the current environment.
• Members agreed that the bank's policy package was continuing to work broadly as expected.
• The board did not rule out adjusting the current package if circumstances warranted.
• Members reaffirmed there was no need to adjust the package of measures in Australia in the current environment.
• Members agreed to continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted.

Traders are looking to these headlines to provide additional colour on the Board’s policy discussions.

The quarterly statement plus a recent testimony from Governor Lowe and colleagues was likely meaning there will be little new from them and therefore may not impact the currency significantly. 

AUDS/USD update

• AUD/USD fades upside momentum near one-week high above 0.7200 after RBA minutes

Description of the minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision.

The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee.

Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.