MNI BRIEF: Future Easing Pace Unknown - RBA Minutes

The Reserve Bank of Australia board agreed it was too soon to judge the pace of future cash rate reductions at its meeting earlier this month, when it cut the cash rate 25 basis points to 3.6%, given prevailing uncertainties, Minutes published Tuesday showed.

“In light of this, they emphasised the need to be attentive to the data and to be guided by how they shape the evolving assessment of risks,” the August Minutes noted. (See MNI RBA WATCH: Bullock Points Toward Further Cuts) “The Board will remain focused on its mandate to deliver both price stability and full employment and will do what it considers necessary to achieve that outcome.”

The board noted the RBA’s downward revision to productivity growth was unlikely to affect its outlook for inflation or policy. Staff judged that lower productivity would reduce both potential supply and demand, meaning forecasts for spare capacity and domestic inflation pressures were little changed. Forecasts for wages and income growth were also revised down in line with historical links to productivity.

Members agreed monetary policy was well positioned to respond to future data and shocks. Based on information available at the meeting, they judged that preserving full employment while bringing inflation back to the midpoint of the target range would likely require further reductions in the cash rate over the coming year. They stressed, however, that the pace of cuts should be guided by incoming data on a meeting-by-meeting basis.