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Today’s RBA Minutes Points towards Further Rate Cuts in the Coming Month

May 19, 2015

Today RBA released minutes on the last board meeting that was on May, 5. The minutes when analysed are indicating a further rate cut, with the slowdown in China, weak capital expenditure and concerns about the job market continuing to weigh on its thinking.

The minutes also explained that the board was waiting for June for its second interest rate cut, but done it in May, just because of the release the same week of its closely-watched quarterly statement on monetary policy. If it had waited for June then it would have allowed it time to digest projections in the federal budget, handed down last week.

So as to balance the things, the board decided that the best course was to ease monetary policy further at [the May 5] meeting,” the minutes say.

RBA’s openness to interest rate cuts in minutes have set up a topic for debate around whether or not the current rate cutting cycle is over.

There was still “scope” for a further reduction in the cash rate, below its current record low of 2 per cent”, said Philip Lowe, Deputy Governor.

Felicity Emmett, Australia and New Zealand Banking group economist said, “RBA minutes from the May board meeting provided little new information on the economy. The minutes did, however, provide an explicit [openness to further cuts] – something that was absent from the post-meeting statement, although in our view implicit in the bank’s ongoing forecast for below-trend growth and rising unemployment.

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