Reserve Bank of Australia May minutes:
- Board considered keeping rates unchanged, cutting by 25 bps or 50 bps
- Decided case for 25 bps cut was stronger one, preferred policy to be cautious and predictable
- Inflation still not at mid-point of target band, labour market still tight
- Board agreed developments in domestic economy alone warranted a rate cut
- Progress on inflation meant policy did not need to be as restrictive
- Some downside risk that domestic household consumption might not pick up
- Larger move might offer more insurance against adverse global scenarios
- US trade policy was a significant and adverse development for global outlook
- Board not persuaded that 50 bps was needed, US tariffs had not yet affected Australian economy
- Would be challenging for business, households if aggressive easing had to be reversed
- Board judged not yet time to move monetary policy to an expansionary setting
- Expansionary policy might be needed if worst of global trade scenarios eventuated
- Policy well placed to respond decisively if international devlopments warranted it
This article was written by Eamonn Sheridan at www.forexlive.com.