The RBA held the official cash rate steady at its board meeting in May, as it had for every meeting since the cash rate was reduced to 1.50% in August 2016. Statements from RBA officials through 2018 had indicated the next move was “more likely to be an increase” until February of this year. The RBA then changed its tune and stated “the probabilities around these scenarios were now more evenly balanced than they had been over the preceding year…” Two months later, the RBA’s April minutes stated nothing was likely in the foreseeable future. “Given this outlook for further progress towards the Bank’s goals, members agreed that there was not a strong case for a near-term adjustment in monetary policy.” However, the minutes also stated a cut in the cash rate would be appropriate “where inflation did not move any higher and unemployment trended up…” Note the use of the word “trend”.
The minutes of the RBA Board’s May meeting have now been released and the contents complete the shift which started in late 2018 of the RBA’s outlook from “hawkish” to “dovish”.
Local bond yields fell across the curve despite higher yields in offshore markets. By the end of the day, 3-year, 10-year and 20-year ACGB yields had each shed 4bps to 1.18%, 1.65% and 2.09% respectively.