RBA leaves rate unchanged, but amends policies

The Reserve Bank of Australia at its December meeting decided to leave the official cash rate unchanged at 6.75 per cent, but has announced three changes in policy that may reflect discussions between its governor and new Labor treasurer Wayne Swan.

The first two of the changes remove the veil of secrecy that the bank has previously been criticized for.

In the first, the bank has said that it will release comment on the reasons for its decision as it announces the decision.

The first such statement accompanied the December decision, and says that, while the board is concerned about inflation in the first half of 2008, it believes that a number of factors will help to contain private demand over the next couple of months.

Principally amongst those factors it identifies increased borrowing costs, both as a result of its own actions and market-driven increases in funding costs for intermediaries. It identifies this latter as likely to continue for at least the immediate future.

Second, the bank will now release the minutes of its monthly board monetary policy meetings, two weeks after the meeting. This brings it into line with central banks in just about very other developed economy.

And the third change is one of timing. Instead of announcing its rate decision at 9.30am the day after the meeting and it taking effect immediately, the decision will be announced at 2.30pm on the day of the meeting, and come into effect the following morning.

This change will take effect from the board’s February meeting (it does not normally meet in January).

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