RBA minutes: Further easing “more likely than not” - ANZ

According to David Plank, head of Australian economics, the minutes from the June RBA Board meeting send a very clear signal about future policy steps, with the concluding paragraph saying that:

“Given the amount of spare capacity in the labour market and the economy more broadly, members agreed that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead.”

Key Quotes

“Such an explicit signal about the likelihood of another cut in the minutes of the meeting where rates were moved is unusual. The minutes from the meetings in February 2015 and May 2016, in each case being the meeting where the first of two cuts took place, did not provide any such clarity about the next move. So we clearly need to take note of this unusually strong signal.”

“Since the June meeting we’ve had the employment report for May. While employment growth was exceptionally strong for the month, there was no improvement in unemployment or underemployment. The continuation of significant slack in the labour market seems likely to persist for some time. The signal from the Board minutes is that the RBA wants to get policy to a more stimulatory level quite quickly to.”

“But there are long lags between policy moves and transmission to the economic data. We struggle with interpreting the minutes as indicating the RBA intends to ease at every meeting until it sees the labour market turn around.”

“We look to the Governor’s speech on Thursday to clarify the near-term policy outlook. In particular, whether we need to bring forward our expectation of the next rate cut to July from our current expectation of August.”