Reserve Bank of Australia (RBA) has used the minutes of its monthly board meeting to signal that another interest rate cut is possible.
For the third month in a row, the RBA gave observers some information not available in its announcement following its first-Tuesday-of-the-month monetary policy meeting.
In the past, the minutes, effectively, have been little more than an extended rehash of the announcements. But, the central bank appears to have elevated their status to a more important part of its communications.
The key sentence in the October 1 meeting minutes, released on Tuesday, came right near the end.
“Members agreed that the Bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them,” it said.
It was a direct repeat of the key sentence in its September 3 meeting minutes, and almost identical to one in the August 6 minutes.
This affirmation of what might be called a “delayed easing bias” means a cut in the cash rate next month is now very unlikely, barring a financial crisis sparked by political dysfunction in the US.
Given the RBA’s clear preference for making its moves – or beginning a series of moves – at the first opportunity after key inflation data, the September quarter consumer price index figures next week were seen as a possible trigger for a cut on November 5.
But with the repeated signal that a rate cut is not imminent, the next likely trigger point is now February, after the December quarter CPI numbers in late January.
If there is a cut, the case for it was been laid out clearly in the latest minutes – below trend economic growth, a subdued labour market with rising unemployment and slowing wages growth, on-target inflation and fading mining investment.
The case for waiting a while is there too – there are signs, notably in the housing sector but also in consumer and business confidence, that low rates are starting to have an impact and further effects are yet to flow through.
“The board’s judgment was that, given the substantial degree of policy stimulus that had been imparted, it would be prudent to leave the cash rate unchanged at the existing low level while continuing to gauge the effect.”
So, the RBA is in wait-and-see mode, but will cut further if it thinks its earlier cuts aren’t gaining enough traction.
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