Since that meeting, there have been a number of data releases that have heightened speculation about further reductions in the repo rate. In particular, the February retail sales came in well below consensus, and some of the manufacturing sector releases also disappointed. I should, however, warn against jumping to conclusions, particularly on the basis of one month’s data that is open to various interpretations.
It is important to look at the reasons for the latest repurchase rate reduction. Our statement emphasised that despite clear signs that the economy had emerged from the recession, the pace of recovery was still below potential. We saw the improvement in consumption expenditure in particular as being tenuous.