According to analysts at ANZ, the Minutes from the July RBA Board meeting reflect broadly similar sentiment to the July decision statement as the Minutes provided further clarity on why the Board decided to cut the cash rate immediately again.
“The Board clearly wants to see the unemployment rate come down faster than the RBA previously forecast, given its new thinking that NAIRU is now 4.5%. This and the Board’s observation that “spare capacity was likely to remain in the labour market for some time” suggest to us that the Board recognises that more cuts are necessary – it is just a matter of timing.”
“The Minutes explicitly mentions that the Board is not concerned that lower interest rates will cause an asset bubble in the housing market.”
“As the exchange rate has barely moved since the July cut and with the US likely to start easing as early as this month, further rate cuts would be required to get the exchange rate lower.”
“The Minutes suggest that the Board concluded that to get unemployment lower at a faster trajectory than previously planned, a further rate cut in July would be needed. In terms of further rate cuts, given the labour market was once again cited as the driver for this rate cut, any further deterioration in the coming months to the unemployment rate will likely lead to further easing. Indeed, lack of progress to the downside may trigger further cuts.”
“In terms of the August meeting: after the RBA updates its forecasts and recognises more cuts are needed to get the unemployment rate trending towards 4.5%, we think the Board will be asking – Why wait? At this stage we don’t think it will wait, but there are further inputs to come before the decision; this week’s employment data, next week’s speech by the Governor and then Q2 CPI the following week. “