RBA Minutes: Members emphasize more weight on downside risks to the economy

The Reserve Bank of Australia (RBA) published the Minutes of its February monetary policy meeting on Tuesday, highlighting that the board judged case to cut rates was the stronger one. Members placed more weight on the downside risks to the economy.

Key quotes

Board judged case to cut rates was, on balance, the stronger one.

Members placed more weight on the downside risks to the economy.

Particularly mindful of risk of keeping policy too tight for too long.

Board agreed decision did not commit them to further cuts in the cash rate.

Members expressed caution about the prospect of further easing

If inflation proved persistent, rates might stay at 4.1% for an extended period or be raised.

Strongest argument for cutting rates was the slowdown in inflation and wages.

Considered whether there was more spare capacity in labour market than thought.

Risk employment in non-market sector would slow, recovery in household consumption not assured.

Board considered three main reasons for keeping rates unchanged

Strength in labour market strongest reason for holding steady, tightness not consistent with 2.5% inflation.

Possible policy was not as restrictive as thought, or that the economy could pick up quicker than expected.

US trade policy could have material adverse effect on business investment, household consumption.

Market reaction to the RBA Meeting Minutes

At the time of writing, AUD/USD is trading 0.09% lower on the day to trade at 0.6215.