RBA: Minutes show Bank in no rush to ease further

FXstreet.com (San Francisco) - According to the Minutes of the Reserve Bank of Australia’s December meeting, at which the decision was made to cut the cash rate by 25 bps to 3%, the RBA says it holds a weaker labour market outlook, noting that “Leading indicators and information from the Bank's liaison contacts suggested that labour demand had softened, which pointed to only modest employment growth in coming months,” the Minutes read.

The central bank also said it saw inflation outlook affording scope to support demand: “For inflation to remain contained, ongoing productivity growth and a further sustained moderation in wage growth would be needed.” The Minutes continued: “The forward-looking labour market indicators had generally declined recently, suggesting that employment growth would remain modest in the months ahead.”

However, the minutes did not say anything explicitly to seriously challenge market pricing. John Kicklighter, Chief Strategist for DailyFX.com offers his initial impressions after the release of the Minutes: “Nothing particularly illuminating in the RBA minutes beyond what we already garnered after their actual decision.”

David Scutt, Treasury Dealer at Arab Bank Australia notes that, as expected, the RBA's tone is dovish, as “they don't seem in any rush to ease further,” he says. “Based on recent events it's hard to see a cut in February.” Mr. Scutt also notes that cash rate futures are now pricing in a 25bps cut from the RBA in Feb at 58%, down from 63% prior to the release, he explains.