MNI BRIEF: Domestic Economy Drove 25bp Cut - RBA Minutes

Domestic economic developments on their own justified the Reserve Bank of Australia board's May decision to lower the cash rate by 25 basis points to 3.85%, with the easing case strengthened by global trade uncertainty, according to the minutes released Tuesday.  

However, board members did not see the case for a 50b reduction despite debating the possibility, noting limited evidence that international tensions were materially harming the local economy and warned that certain adverse scenarios could push inflation higher. (See MNI RBA WATCH: Board's Dovish Turn Included Debate Of 50bp Cut)

The board judged it premature to shift policy to an expansionary stance, as inflation remained below target and the labour market appeared tight. "These considerations and the prevailing global policy uncertainty led members to express a preference to move cautiously and predictably when withdrawing some of the current policy restriction," the minutes showed. 

Members agreed policy should remain responsive to global developments that materially affect activity and inflation. The Board reiterated its commitment to price stability and full employment, affirming that future decisions will be data-driven and focused on achieving its dual mandate.