By Greg Peel

"Conditions in global financial markets had continued to be very unsettled, with uncertainty increasing about both the prospects for resolution of the sovereign debt and banking problems in Europe and the outlook for global economic growth."

So said the RBA at its October meeting, as noted by the minutes of that meeting released this morning. The problem is that the meeting was on October 4, and on Sunday October 9 Chancellor Merkel and President Sarkozy stepped out of their own meeting to announce to the world that they had a cunning plan. They couldn't say what it was yet, but it was very cunning, and should do the trick. Subsequently we've since seen a 10% stock market bounce.

The statement above opens the final section in the October RBA minutes, which is always the one entitled "Consideration for Monetary Policy". That is, it's the one that matters. Given the RBA was oblivious as to what was about to happen, the rest of the considerations have to be taken somewhat with a grain of salt.

It was the minutes of the September RBA meeting which gave the first hint that Europe might force the central bank to act if needs be. The October statement accompanying the "on hold" decision went one step further. After months of highlighting the inflationary pressures building due to Australia's runaway resource sector, the RBA finally began to concede the rest of the economy was doing rather poorly. Perhaps poorly enough to mean inflation would not rise so much after all. Throw in another Lehman-style event stemming from Europe, and the RBA was again ready to pull out the big guns and start cutting.

In the September minutes, Australia's broader economy was "softer than earlier expected". In the October minutes it is noted that in some sectors, "cautious behaviour by households and the earlier rise in the exchange rate were having a notice dampening effect". In September, Australia's economic growth outlook was "somewhat weaker than had been expected earlier". In October, growth is "unlikely to be as strong as earlier expected".

When the RBA made its rate decision and released its accompanying statement on October 4, economists suddenly became convinced on the strength of the rhetoric that a rate cut was coming on Cup Day. Not all were convinced ? some were still holding out for December ? while others such as Westpac said "I told you so". [Didn't really. They are more respectful than that.]