RBA July minutes: Further rate cuts are warranted over time, focus on timing & extent

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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This article was written by Eamonn Sheridan at investinglive.com.