The new Policy Council comes in RBA analysis with an inability to predict

By Wayne Cole

Sydney (Reuters) -The Central Bank in Australia is facing a problem in communication that has injected an element of the inability to predict the interest rate policy when global uncertainty is already high, and proving it costly to investors.

All of this stems from the shaking in April at the Australian Reserve Bank, which conveyed the full price determination force to a new monetary policy council of nine members.

Only in its second meeting in May, the Board of Directors decided to reduce money rates by a quarter to 3.85 % and seemed more than expected, even given the reduction of 50 points mainly due to the uncertainty caused by American definitions.

This, in addition to some soft economic data, investors wagered severely on another reduction in July, while a Reuters poll from 37 economists found 31 expected.

It is important, investors were encouraged to accumulate these situations because RBA has not retracted expectations, as they often did in the past.

Imagine their amazement, then, when MPB kept fixed rates in a rare decision from six to three, leaving many investors with painful losses.

Speaking to the media after the decision, RBA Michel Bullock Governor explained that the bank could no longer provide the guidance because the price decision was reaching the board of directors alone and could not be prohibited.

Basically, RBA changed the way he communicates to the markets, without telling those markets that have changed.

“Due to the lack of one member in MPB in the entire council, it is unlikely to support future communications between fluids or return to prices in the market,” said Lucy Ellis, the chief economist in Westpack and a former assistant assistant at RBA.

“This means that the markets will be surprised by more than one countries like the United States, as the central bank puts more weight to avoid the market.”

RBA is a minority on board

Since then, the good inflation report now has now persuaded the investors that MPB will reduce prices to 3.60 % in its next meeting on August 12, in part in the hope that he would not want to shock twice in a row.

However, the unusual MPB composition makes additional uncertainty because it contains only two RBA officials, along with senior treasury officials and six part -time external members with backgrounds in economics, business and banking services. The latter is appointed by today’s treasurer with RBA inputs.

The markets have little ideas about the views of these six, and it is unlikely to change, as there are only mysterious plans for each to show one general appearance per year.