RBA August minutes: Some further reduction in cash rate likely to be needed in coming year

Reserve Bank of Australia minutes, from the August 11-12 meeting:

• The RBA board saw a strong case for a 25bps cut in the cash rate

• The board judged some further reduction in the cash rate likely needed over the coming year

• The stance of policy was still considered somewhat restrictive

• The pace of rate cuts would be determined by incoming data and the balance of global risks

• The board saw arguments for both a gradual pace of easing and for a faster pace

• The labour market remained a little tight, inflation was still above midpoint, and domestic demand was recovering

• Uncertainty about spare capacity and the neutral rate also argued for gradual easing

• Faster easing might be needed if the labour market is already in balance, risking inflation undershooting the midpoint

• The balance of risks could shift to the downside on adverse developments in the global economy

• The board agreed it was not yet possible to judge between scenarios and would be guided by data

• Latest staff forecasts were consistent with meeting full employment and inflation targets

• The board judged house price increases to be within the bounds of past easing cycles, with home building picking up

• Risks from U.S. tariff policy remained significant, though the worst outcomes seemed to have been avoided

• The board considered whether to run down government bond holdings at a faster pace but decided it was not needed

• Bonds would continue to be run down as they mature, with a faster pace no longer under consideration

These are a little less hawkish (more dovish, if you prefer) than I was expecting. I bolded those that highlight this take for me. Of course, the ‘data dependence’ was reiterated, CPI and jobs the big two to watch ahead.

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AUD/USD has dipped after its rally earlier on the Trump firing Cook news:

• ICYMI – The USD has been smashed lower on the news that Trump has fired Fed Governor Cook

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From the day of the cut:

• RBA cuts cash rate by 25 bps to 3.60% in August monetary policy decision
• RBA governor Bullock: There was no discussion of a larger rate cut
• RBA governor Bullock: We are focused on inflation and employment
• RBA governor Bullock: The board is always data dependent

This article was written by Eamonn Sheridan at investinglive.com.