Minutes from the RBA’s May 5th meeting were released Monday, the content of which stated that the central bank had deliberated about delaying an interest rates cut, but given the forecasts for continued slow growth and the jobless numbers remaining high for longer than expected, it had made the decision to go ahead, cutting the rate a quarter point to a record low of 2%.
The minutes showed that the board members decided to hold back from giving any clear guidance on the direction of its future policy but could consider introducing some easing by the end of May or early June.
"Today’s RBA minutes from the May board meeting provided little new information on the economy. The minutes did, however, provide an explicit easing bias – something that was absent from the post-meeting statement, although in our view implicit in the Bank’s ongoing forecast for below-trend growth and rising unemployment," noted Felicity Emmett, Co-Head of Australian Economics at ANZ after the minutes had been released.
“….they suggest that while the Board is reluctant to cut further, it has scope to adjust rates if growth disappoints," he continued.
Weak Dollar Necessary
According to the RBA, a weaker currency was necessary and would probably happen given the declines in essential commodity prices. Rate cuts would boost economic activity by strengthening household demands, sustaining business investment and leading to stronger labor market conditions in the long run.
The Australia dollar fell Monday to a low of $0.7954 before rebounding to $0.7991.
The RBA next meets on June 2.