RBA Gov Lowe: To consider a rate cut at June meeting

Author: Eamonn Sheridan | Category: Central Banks

Reserve Bank of Australia 

  • Says to consider cutting interest rates at June policy meeting
  • says lower rates would support employment, help lift inflation toward target
  • need further improvement in labour market, jobless rate to fall under 5%
  • economy can support unemployment rate under 5% without inflation concerns
  • says recent data make it less likely labour market will surprise on upside
  • our forecasts for growth, jobs would have been softer without assumption of rate cuts
  • also scope for fiscal policy, structural reform to boost employment
  • looking for tax relief to help lift household income growth
  • sees only limited inflation pressures across much of the economy
  • says wages growth too slow to be consistent with inflation target
  • terms of trade, infrastructure spending, rising mining investment to aid economy
  • global picture looks a little brighter, expects growth to strengthen later in year
  • failure to resolve trade disputes a major downside risk to global economy

Well, I have to admit this has me shaking my head in wonder. Have the Board not considered a rate cut up until now? Not at the May meeting? It wasn't even considered?

OK then. So in June they'll be considering it. 

Apart from that little bewilderment …. those highlights above (via Reuters headlines) read quite dovish indeed. Lowe and company at the RBA have sat on their heir hands for years, it finally appears that are budging from their fixedness. As a guide there are 2 things the RBA need to move on rates (a cut in this case) - 
  • reasons to cut
  • and reasons to cut now
Does that make sense? So at a meeting there has to be reasons to cut, and reasons to not wait. I reckon this speech makes those two cases. Given Lowe's record of hesitancy I am reluctant to say a June cut is coming, but …. this is significant new info - June 4 rate cut looks like a good bet as of now. 

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