The number of RBA Board meetings should be cut from the current 11 per year to a maximum of eight.
As exciting, interesting and enlightening each of the RBA Board meetings are for those of us watching and anticipating monetary policy changes, the current timetable for RBA meetings means that there is an almost unbroken, high profile, often erroneous running commentary on interest rates. No other country seems to have such an interest rate and monetary policy obsession. It’s almost unhealthy how much attention is placed on the RBA interest rate decisions each month when most of those decisions are to keep rates steady. When rates are adjusted from time to time, the moves are usually well anticipated by the market.
My proposed eight RBA Board meetings each year could be slated in for the Wednesday following the release of each quarterly consumer price index and each quarterly national accounts. This would spread the meetings and decisions on interest rates smoothly throughout the year. While no single CPI or national accounts release will drive medium term monetary policy settings, the growth and inflation results are important factors when working out how the economy is going which means the news from these releases will feed into RBA deliberations.
The 27% cut in the number of RBA Board meetings each year would have few procedural consequences. The release of RBA Board meeting minutes would be unchanged, other than to meet the requirement from there being fewer meetings each year. The Quarterly Statement on Monetary Policy could be maintained on something very close to the current timetable and the biannual appearance of senior RBA officials before the House of Representatives Economics Committee would also be unaffected.
There would also be a savings for the RBA. Apart from cuts to travel costs for Board members, RBA staff would have to prepare fewer Board papers freeing up resources for other research projects. There may even be a headcount saving for the RBA.
For financial markets, the various market instruments that price in anticipated changes in the official cash rate would be unaffected. The new dates for RBA meetings would be plugged into the spreadsheets and market pricing would be adjusted accordingly.
The new scheduling would help the RBA deal with the Melbourne Cup day problem where the monetary policy decision on that day each year competes with the race that stops the nation. Best to avoid that clash.
Of course the RBA would maintain its ability to meet and adjust rates in emergency or adverse circumstances, outside the timetable of regular meetings so nothing would change on this score.
The bottom line of the change would mean interest rate announcements would occur every six and a half weeks rather than the current four and a half week timeframe. The intense and seemingly unbroken commentary on “will they; wont they” hike or cut would be diluted at least a little bit. The other benefit would be that in setting retail interest rates, there would be a greater opportunity for banks to adjust rates according to changes in funding costs as those pressures emerge rather than being held to account each time the RBA changed rates.
It makes sense.