Unlike the minutes of the RBA‘s May meeting, minutes from June meeting contained little in the way of any new information. According to Westpac “The minutes to the June monetary policy meeting of the Reserve Bank Board were largely as expected, repeating the key themes and wording of the Governor’s decision statement and providing no explicit guidance on the outlook for policy.”
While there was little to chew on, the minutes did clearly acknowledged the upside surprise on GDP growth. “Members began their discussion of the Australian economy by noting that growth in real GDP in the March quarter was stronger than anticipated in the May Statement on Monetary Policy.”
However, at this stage economists are still expecting the RBA to ease monetary policy further and cash markets are still largely factoring in 25bps of cuts, although prices are currently indicating a little less certainty than before the minutes were released.
JP Morgan economist Sally Auld said, “The RBA acknowledged in the minutes that leaving policy unchanged in June was consistent with returning inflation to target over time.” Even so, she thinks a rate cut is coming. “… recent currency strength and the latest iteration of the Fed’s re-think of how rate normalisation is likely to proceed will mean that the current pause is relatively short lived, and that risks continue to remain biased towards a cash rate of 1% in 2017.” Westpac’s Matthew Hassan does not think the RBA will cut quite that far. “[It] remains our assessment that the June quarter inflation read will reconfirm to the Board that, on a ‘no policy change’ basis, inflation is unlikely to return to the Bank’s 2%-3% target over the forecast horizon and that another 0.25% cut is necessary with that cut being delivered at the Board’s meeting on August 2.”
Click here for the full version of the June minutes.