Reserve Bank of Australia July meeting minutes
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Board agreed further rate cuts warranted over time, focus was on timing and extent of easing
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Board considered whether to leave rates at 3.85% or to cut by 25bps
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Majority agreed prudent to await confirmation on inflation slowdown before easing
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Majority felt cutting rates three times in four meetings would not be “cautious and gradual”
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Case for no change cited some data, including on inflation, had been little firmer than expected
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Job market had also not loosened as expected, less risk of severe global downturn
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Members agreed monetary policy was modestly restrictive, though financial conditions had eased
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Difficult to know how far rates can fall before policy no longer restrictive, so prudence needed
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Minority for rate cut put more weight on downside risks to economic outlook, inflation
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Case for cut cited evidence inflation was on track to mid-point of target band, if not lower
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U.S. tariffs would be drag on world growth and thus Australia, where GDP already subdued
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Unsure whether market sector employment would pick up as non-market sector slowed
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Outlook for global economy highly uncertain, U.S. trade policy unpredictable
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The majority of the nine member board opted to hold (obviously!). The three members that argued for a rate cut, cited:
- sufficient evidence that inflation was on track to be sustainably back to target
- no need to wait before easing policy further
These are a set of minutes that are reinforcing a net cautious easing bias. While further reductions are seen as warranted over time, the emphasis on waiting for more confirmation around inflation suggesting a data-dependent path forward. The split on the board and acknowledgement of firmer-than-expected labour and inflation data may dampen near-term rate cut expectations.
Markets may scale back aggressive easing bets, supporting Aussie dollar resilience and keeping short-end yields sticky. Risk assets could face headwinds if the RBA errs on the side of patience, especially amid global growth concerns and U.S. trade uncertainty.
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Background, from the day itself:
- RBA leaves cash rate unchanged at 3.85% in latest policy decision
- AUDUSD jumps as RBA delays rate cut. What’s next?
- RBA’s Bullock: It is appropriate to have a cautious, gradual stance on easing
- RBA’s Bullock: We want to be sure on inflation
- RBA’s Bullock: People got too excited about mention of 50 bps in May meeting
- RBA’s Bullock: Our communication strategy is not failing
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This article was written by Eamonn Sheridan at investinglive.com.