RBA Board Minutes – August 2013

• The minutes indicate that the RBA cut the cash rate in August and retain a moderate easing bias.
• But another rate cut is not “imminent” and appears to be dependent, like the others, on the jobs and inflation outlooks.
• GDP growth is expected to be below trend for the coming year with inflation staying in the lower half of the target band.
• The AUD is still depicted as “being at a high level”. The RBA clearly prefers a lower AUD, to help lift growth.
• The positive international data flow over the past week resulted in markets pricing in only a small chance of another cut.
• The QIII CPI in late October could lift the chances of a rate cut if it reveals tame prices, and demand conditions are weak.

The RBA Board cut the cash rate in August to a record low of 2.50%, citing below trend growth and well-behaved inflation as reasons to move. The rate cut was seen as “appropriate to help support growth in the economy”. At the time, the carbon copy type nature of the post meeting statement and the dropping of the line about the scope to ease was widely seen as indicating a reluctance to cut rates further. But, today’s minutes indicate that the Board does not want to close off the chance of another rate cut, nor imply that another one is imminent. The minutes can be construed as indicating that the hurdle for another rate cut may be higher than the previous ones.

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