RBA to have fewer but longer monetary policy meetings

The Reserve Bank of Australia today (July 12) announced changes to how it makes and communicates monetary policy, including reducing the number of monetary policy meetings.

Earlier this year, an independent panel concluded a major review of the RBA and proposed a raft of changes to the central bank’s governance and monetary policy framework. Australian treasurer Jim Chalmers launched the review in July 2022 amid public criticism of the RBA’s record.

RBA governor Philip Lowe told an audience today that the central bank will start adopting some of the panel’s recommendations.

One key change involves cutting the number of policy meetings held by the Reserve Bank board from 11 times a year to eight times, starting in February 2024. Lowe said the central bank will publish the exact dates of the meetings soon.

The future board meetings will be longer than the current ones. They will typically start on Monday afternoon and continue Tuesday morning, with the outcome to be announced on Tuesday afternoon. Current meetings last for about three and a half hours on a Tuesday morning.

Additionally, all board members will have the opportunity to attend an internal staff meeting some time before the board meeting. This will allow them to exchange views with a broader range of staff, Lowe said.

Under the changes, the board, instead of the governor, will issue a statement announcing its decision following the meeting. The governor will hold a media conference after the meeting to explain the decision.

The RBA will release quarterly monetary policy statements at the same time the board announces its policy decision. These statements are currently issued three days after a monetary policy decision is announced.

The board will also work with the Treasury to conduct a review of the RBA’s monetary policy framework every five years, Lowe said.

The governor said the less frequent and longer meetings will give board members more time to examine issues and have deeper discussions. Staff will also have more time to do analysis, he added.

Post-meeting media conferences will allow the governor to explain the board’s decisions and answer questions in a timely manner, Lowe said.

“The world we face is increasingly complex and it is right to re-examine how we make and communicate monetary policy decisions, and how the RBA is managed,” Lowe said. “This is a significant package of reform that will contribute to better decision-making and communication.”

Wider changes

Lowe said the board has agreed to update a code of conduct, making it clear that board members are barred from transacting in interest rate and foreign exchange derivatives. They will also be prohibited from actively trading in financial instruments.

The RBA is introducing additional changes to its internal operations. The central bank has begun advertising more management vacancies externally and will begin a search process for a new chief operating officer position later this year.

It will also set up a separate communications department, which will provide strategic communications advice to the governor and the board. Lowe said they will start searching for an executive to lead this new department soon. Currently, the secretary’s department is responsible for the RBA communication, on top of providing secretariat and co-ordination services to management.

Lowe did not touch on some other recommendations made in the RBA review that would require legislative amendments. These include a proposal to split the RBA’s current single board into two, one for determining monetary policy and the other for governance.

The governor said the board considered it best to implement some other recommendations after the legislative process, and when a new monetary policy board is up and running.

Recommendations for later consideration include publishing an unattributed vote count after each meeting, setting up an advisory group to engage with the board, and requiring all board members to make regular public appearances to explain monetary policy.

New governor?

Lowe’s seven-year term as RBA governor expires on September 17. He can be reappointed, but widespread criticism of the central bank has led to speculation that he will be replaced. Chalmers said today that the cabinet would meet soon to decide on the new central bank governor.

“Soon, I’ll be taking to cabinet my recommendation for the appointment of the governor of the reserve bank,” the treasurer told reporters. “I don’t want to front-run or pre-empt the timing or nature of that conversation with my colleagues.”

The Sydney Morning Herald said Lowe’s likely replacement could be unveiled this week, without citing any sources.

According to media repots, potential candidates for the top job include RBA deputy governor Michele Bullock and finance secretary Jenny Wilkinson.