The RBA cut the official cash rate by 25bps at its board meeting in June, the first such change since August 2016.
Statements from RBA officials through 2018 had indicated at the time the Bank’s next move was “more likely to be an increase”. Around 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…”
By May, the shift of the RBA’s outlook from “hawkish” to “dovish” was complete. “Members considered the scenario where there was no further improvement in the labour market in the period ahead, recognising that in those circumstances a decrease in the cash rate would likely be appropriate.”
The minutes of the RBA Board’s June meeting have now been released. In the meeting, the Board’s deliberations focussed on spare capacity in the labour market and the various ways which indirectly indicate the extent of utilisation.