Reserve Bank of Australia February meeting minutes
Board judged case to cut rates was, on balance, the stronger oneMembers placed more weight on the downside risks to the economyParticularly mindful of risk of keeping policy too tight for too longBoard agreed decision did not commit them to further cuts in the cash rateMembers expressed caution about the prospect of further easingIf inflation proved persistent, rates might stay at 4.1% for an extended period or be raisedStrongest argument for cutting rates was the slowdown in inflation and wagesConsidered whether there was more spare capacity in labour market than thoughtRisk employment in non-market sector would slow, recovery in household consumption not assuredBoard considered three main reasons for keeping rates unchangedStrength in labour market strongest reason for holding steady, tightness not consistent with 2.5% inflationPossible policy was not as restrictive as thought, or that the economy could pick up quicker than expectedUS trade policy could have material adverse effect on business investment, household consumptionAt this meeting the Bank cut rates for the first time since November 2020. The rate hiking cycle began in May 2022 with a move to 0.35%, and the Bank had been on hold at 4.35% since last hiking in November 2023.
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In summary from the Minutes, the Reserve Bank of Australia (RBA) opted to lower the cash rate by 25 basis points to 4.10%, citing increased downside risks to the economy.
Policymakers expressed concern that keeping monetary policy too tight for too long could stifle growth. However, they also remained wary of the potential for an easing cycle to reignite inflationary pressures, as core inflation remains above the 2–3% target band at 3.2% and is not expected to return to the mid-point anytime soon.
Despite the rate cut, the RBA emphasized that this move does not signal a commitment to further reductions, keeping future policy decisions flexible and dependent on evolving economic conditions. The board’s approach highlights the delicate balance between supporting growth and ensuring inflation does not accelerate.
Reserve Bank of Australia Governor Bullock at her February 18 press conference following the rate cut.
This article was written by Eamonn Sheridan at www.forexlive.com. Read More Details
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