To most outsiders, it all sounds a bit ho-hum.
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 a 2.5 per cent 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” saying:
In the Board’s judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.
Tea leaf readers who scrutinise the RBA’s 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.
Uncertainty around the future of cash rate ‘stability’
“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 here on 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 $US79.60 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.”