In the words of the immortal Charlie Rich, "there won't be any more". The Reserve Bank is done with cutting rates. Expressed in words the market will understand: there is scarcely any easing bias left.
Earlier this year the bank was ending each of the monthly reports that follow its board meetings with a statement that, "the inflation outlook as currently assessed may provide some scope for further easing, should that be required to support demand".
Not any more. And not because the inflation could not easily accommodate a further rate cut.
It is because things are turning out as the Reserve Bank hoped they would. The housing market is picking up, just as the bank intended when it started cutting rates. The dollar is much lower (even after the recent lift, it is down 10 per cent in six months). Business and consumer confidence is climbing. And the overseas outlook is more positive than it has been in years, notwithstanding what will most probably be only a short-lived government shutdown in the US.
When you are getting what you want it is wise to give thanks. And not push further.
China, Europe, the US and even Japan are looking better than they did. Overseas measures of business and consumer confidence are lifting, as are the measures at home. While there is not yet the roaring optimism of the pre-global financial crisis days, it is entirely possible it will come. The bank believes that is now more likely than a return of self-fulfilling pessimism.
Sydney home prices are up 10 per cent in the year to date and Melbourne prices are up 7.1 per cent. While to some that is a cause for concern, to the Reserve Bank it is a necessary consequence of its four most recent interest rate cuts working. Housing demand is interest rate sensitive. When it picks up, prices pick up. That is the surest way the bank can tell its cuts are getting traction.
By themselves the higher prices do not worry the bank. If they were associated with lower lending standards or a rush to greater leverage it would be concerned. But there is little evidence they are just yet, and there is unlikely to be evidence for some time. If there are such signs further down the track, the bank might have to push up interest rates, but it is a problem for the future. (And as far as the bank is concerned, it is an easier-to-manage problem than the stagnation it had thought it was facing.)
There will not be any more rate cuts this year, and the way things look right now, there will not be any more next year. Glenn Stevens pointedly reminds us in his governor's statement that the full effects of earlier cuts "are still coming through, and will be for a while yet". The bank's rule of thumb is 18 months. It cut rates in October, December, May and August. Its rule suggests each of those cuts is yet to fully work its way through the system.