Volatility in some financial markets increased, share prices declined somewhat and a general sense of heightened uncertainty was evident. In considering the implications of all this for our decision on monetary policy, there were two questions to ask.
The first was whether there was information to suggest that financial developments were likely to make a sufficient difference, over the relevant horizon for policy, to the global economy, and therefore the Australian economy and the inflation outlook, to remove the macroeconomic case for a 25 basis point adjustment to cash rates. On balance, we judged that there was not.