The Reserve Bank of Australia (RBA) is set to implement changes in its operations, as outlined by Governor Philip Lowe in a recent review. These changes include reducing the number of policy meetings to eight per year starting from next year. Additionally, the central bank will now hold press conferences after each decision on interest rates.
Lowe, who is nearing the end of his seven-year term as the head of the RBA, also hinted at the possibility of future rate hikes. However, he emphasized that any future increases would be influenced by economic data.
During a luncheon of economists, Lowe stated, “It remains to be determined whether monetary policy has more work to do. It is possible that some further tightening will be required to return inflation to target within a reasonable timeframe.”
The decision to increase interest rates will depend on how the economy and inflation evolve in the coming months.
Over the past year, the RBA has raised its official cash rate by 400 basis points. However, they have chosen to pause this month, awaiting the release of second-quarter inflation data next week. This data could potentially serve as a trigger for further tightening, potentially starting in August.
Independent Review Recommends Sweeping Changes to Central Bank Operations
In a major development, an independent panel has conducted a comprehensive review of the central bank’s operations, revealing the findings earlier this year. The review, initiated by Treasurer Jim Chalmers, aims to implement significant changes, including the establishment of a dedicated policy-making board comprised of independent experts in monetary policy.
Governor Lowe has recently announced several key changes in response to the panel’s recommendations. Firstly, the policy-setting board will now convene eight times a year instead of the previous 11 meetings. Additionally, the duration of these meetings will be extended.
To provide ample time for thorough discussions, policy meetings will commence on Monday afternoons and continue into Tuesday mornings, according to Lowe.
A notable update includes the opportunity for all board members to attend an internal staff meeting prior to the official board meeting. This initiative enables direct engagement with a broader range of staff, facilitating meaningful conversations and allowing for better-informed decision-making.
Lowe emphasized that these less frequent and longer meetings will offer considerable time for in-depth examination of issues, fostering extensive deliberations on monetary-policy strategy, alternative policy options, risks, and effective communication.
To enhance transparency, an unattributed vote count will be published after each policy meeting.
In collaboration with the Treasury, the board is committed to conducting comprehensive reviews of the monetary-policy framework every five years.