RBA

Australia's central bank head turns into minimalist speaker

Governor Glenn Stevens chaired his final Reserve Bank of Australia policy meeting earlier this week and gave almost nothing away on the outlook for monetary policy as he handed over to successor Philip Lowe.

Bloomberg neatly summarized Stevens' last policy statement in this chart:

The statement accompanying his decision to keep the cash rate unchanged at a record low 1.5 percent was just 375 words long, the shortest since May 2015.

He’s “effectively leaving a reasonably clean slate” for Lowe, according to Royal Bank of Canada interest-rate strategist Su-Lin Ong.

A good role model for outgoing governors. Don't tie your successor's hands by committing the bank to a course of action you will no longer be part of...

Australia's Deputy Governor to take the top job

Reserve Bank of Australia's Deputy Governor Philip Lowe is set to take the central bank's top job in September, replacing Glenn Stevens as governor.

Bloomberg, reporting on the appointment:

... opting for the Reserve Bank of Australia deputy fell in with a long pattern of appointments from within the central bank. Unlike counterparts in the U.K. or U.S., Australia’s central bank has almost never seen an outsider put in charge of monetary policy.

In many countries these days, internal candidates have become the favoured pick for central bank governors. Also in Ghana, Turkey as well as in Malasia, one of the deputy governors was promoted earlier this year to take the top central banking job.

Australia backs up unexpected rate cut with clear communications

The Reserve Bank of Australia, whose official "duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people", made a blunt statement justifying its largely unexpected decision to cut interest rates to a record low.

RBA Governor Glenn Stevens, in a statement on the monetary policy decision:

This follows information showing inflationary pressures are lower than expected ... Inflation has been quite low for some time and recent data were unexpectedly low ... the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.

A good example of clear communications: Summing up a policy view in a few words without resorting to reciting statistics.

Forecasting in Australia

Christopher Kent, Assistant Governor of the Reserve Bank of Australia, in a speech on economic forecasting at Australia's central bank:

The Pagan-Wilcox Review was a comprehensive health check of our forecasting approach. While the Review confirmed that our methods are fundamentally sound, it provided a number of valuable suggestions for how we could improve the way we forecast. We have already responded to many of the suggestions and are in the process of following up on others. While these changes are unlikely to see much of an improvement in forecast accuracy, they have the potential to enhance the role that forecasting plays in the policy process and facilitate the usefulness of the forecasts as an important tool of communication.

Nice overview of RBA's forecasting practices. Not only the forecasts themselves, but more importantly the talk accompanying their release, play an irreplaceable role in modern central bank communications.