Borrowers could face bigger interest rate moves under central bank plans to cut the number of rate setting meetings from 11 to eight a year as part of an overhaul of the way it sets and communicates monetary policy that will come into effect next year.
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In a change that could leave mortgage holders with higher rates for longer, Reserve Bank of Australia governor Philip Lowe said that, beginning in 2024, the central bank board will meet on the first Tuesday of February, May, August and November as well as four other meetings, with the exact dates to be announced "soon".
![Reserve Bank governor Philip Lowe has announced "significant" changes to the central bank. Picture by Elesa Kurtz Reserve Bank governor Philip Lowe has announced "significant" changes to the central bank. Picture by Elesa Kurtz](/images/transform/v1/crop/frm/202296158/728e51fc-ce38-4e7b-951d-e6f2ae685ebe.jpg/r0_127_3820_2283_w1200_h678_fmax.jpg)
The change is among a number of reforms recommended by the federal government's RBA Review that Dr Lowe said will be implemented by the central bank, including making rate setting meetings longer, giving board members pre-meeting access RBA staff and the governor holding a media conference an hour after the 2.30pm announcement of the rate decision.
"Together, these changes are significant and represent a substantial response to the recommendations of the review," Dr Lowe said in a speech to the Economic Society of Australia.
"The less frequent and longer meetings will provide more time for the board to examine issues in detail and to have deeper discussions on monetary policy strategy, alternative policy options and risks, as well as on communication," he said.
"Likewise, the staff will have more time for analysis, with less time spent preparing summaries of recent developments."
But decisions about other far-reaching changes recommended by the review, including publishing board votes, regular public appearances by board members and the appointment of an expert advisory group to advise the board, have been deferred.
In pointed comments directed at criticisms that Reserve Bank officials currently exert too much influence interest rate decisions, Dr Lowe said the RBA board, unlike that of almost every other central bank, was dominated by outsiders, with only two of its nine members being central bank officials.
"The other seven spend the bulk of their time outside the RBA," he said. "[This] model has the advantage of ensuring there is diversity of thought and it helps bring a wider perspective to monetary policy decisions."
The governor backed the current monetary policy framework - an independent central bank with a flexible 2 to 3 per cent inflation target - as "fit for purpose" but admitted that some change was needed.
"As times change, we too need to change," Dr 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.
"The board and the bank's staff have supported the review, and we have been working constructively on the recommendations."
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The changes outlined by the governor drew broad support among economists.
AMP chief economist Shane Oliver said there was value in having less frequent board meeting because "often there is not much that happens on a monthly cycle and a lot of effort is put in to every meeting".
"It could result in more considered and better quality decisions," Dr Oliver said.
But he admitted longer gaps between meetings could mean borrowers are left with higher rates for longer when the Reserve Bank eventually begins easing monetary policy.
"If we move to less frequent meetings, people might have to wait longer for [interest rate] relief, but you might get bigger movements," the AMP economist said.
Market Economics managing director Stephen Koukoulas said the effect of such delays were unlikely to be significant.
Mr Koukoulas backed the move to fewer rate setting meetings, noting that the eight board meetings appeared timed to capitalise on the release of major economic data, each coming around 10 days after key quarterly inflation or growth figures would be published.