More on the RBA minutes … so when do they cut?

Author: Eamonn Sheridan | Category: Central Banks

The Minutes are worth going through in full if you have the inclination

Down near the end of the doc we get the bottom line in what the RBA say is their: Considerations for Monetary Policy
Read these two paragraphs … now way are rates going up … but they may well come down... bolding mine:  

  • Members agreed that inflation was likely to remain low for some time. Wages growth had remained low, there continued to be strong competition in the retail sector and governments had been working to ease cost of living pressures, including through their influence on administered prices. In these circumstances, members agreed that the likelihood of a scenario where the cash rate would need to be increased in the near term was low.
  • Members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances. They recognised that the effect on the economy of lower interest rates could be expected to be smaller than in the past, given the high level of household debt and the adjustment that was occurring in housing markets. Nevertheless, a lower level of interest rates could still be expected to support the economy through a depreciation of the exchange rate and by reducing required interest payments on borrowing, freeing up cash for other expenditure.
Earlier post contains similar comments from me, but I though I'd pop up the two paragraphs in full:
OK, so when does the RBA cut? Aye, that's the question. 

Earlier in the minutes the Bank tells us what to watch:
  • rate cut would be "appropriate" if inflation stayed low, unemployment trended up
So, that's what to look out for, and:
  • On inflation - data coming up on April 27
  • On employment - data coming up April 18
Meanwhile, AUD responding to a not hawkish (a dovish? … I reckon so, on balance) RBA:

RBA Minutes dovish AUD



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