The Board of the Reserve Bank of Australia (RBA) is meeting this week and is expected to announce its monetary policy decision for the month, as it does on the first Tuesday of every month.
While most analysts expect the RBA to keep rates on hold, they will be looking for clues and forward looking statements in relation to the overall state of the economy, GDP growth, inflation, interest rates and the Australian dollar.
With all these different factors at play, you might wonder whether you need to pay more attention to the outcomes of these meetings.
After all, if you are an investor in the big banks Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB); you might be really interested in the interest rate decision.
If you own shares in companies such as CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) which earn a significant portion of their income from the US, you might be really interested in where the Australian dollar is headed.
So do you need to focus more on the outcomes of RBA meetings?
I think it depends on your investment strategy. Some investors, such as billionaire hedge fund manager Ray Dalio have a strong macro-economic focus and make investment decisions based on their view of where we are in the economic and credit cycles.
Others, such as Warren Buffett are more focused on the underlying fundamentals of the business and its management team. That's why it's no surprise when Buffett says he has bought shares in boom times, during recessions and under every single US president in his lifetime. He even bought shares the night Trump got elected!
I prefer this long term and fundamentals based approach. That's why even though I will read about the RBA decision this week, I won't make any buy or sell decisions for my portfolio purely based on the outcomes of that meeting.
