Reserve Bank of Australia July meeting minutes
Board agreed further rate cuts warranted over time, focus was on timing and extent of easing
Board considered whether to leave rates at 3.85% or to cut by 25bps
Majority agreed prudent to await confirmation on inflation slowdown before easing
Majority felt cutting rates three times in four meetings would not be "cautious and gradual"
Case for no change cited some data, including on inflation, had been little firmer than expected
Job market had also not loosened as expected, less risk of severe global downturn
Members agreed monetary policy was modestly restrictive, though financial conditions had eased
Difficult to know how far rates can fall before policy no longer restrictive, so prudence needed
Minority for rate cut put more weight on downside risks to economic outlook, inflation
Case for cut cited evidence inflation was on track to mid-point of target band, if not lower
U.S. tariffs would be drag on world growth and thus Australia, where GDP already subdued
Unsure whether market sector employment would pick up as non-market sector slowed
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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