RBA Minutes: Not yet time to move monetary policy to an expansionary setting

The Reserve Bank of Australia (RBA) published the Minutes of its May monetary policy meeting on Tuesday, highlighting that the board decided the case for a 25 basis points (bps) cut was a stronger one and preferred policy to be cautious and predictable.

Additional takeaways

The board considered keeping rates unchanged, cutting by 25 bps or 50 bps.
Decided case for a 25 bps cut was a stronger one, preferred policy to be cautious and predictable.
Inflation still not at mid-point of target band, labour market still tight.
Board agreed developments in domestic economy alone warranted a rate cut.
Progress on inflation meant policy did not need to be as restrictive.
Some downside risk that domestic household consumption might not pick up.
Larger move might offer more insurance against adverse global scenarios.
US trade policy was a significant and adverse development for global outlook.
Board not persuaded that 50 bps was needed, US tariffs had not yet affected Australian economy.
Would be challenging for business, households if aggressive easing had to be reversed.
Board judged not yet time to move monetary policy to an expansionary setting.
Expansionary policy might be needed if worst of global trade scenarios eventuated.
Policy well placed to respond decisively if international devlopments warranted it.

Market reaction to the RBA Meeting Minutes 

At the time of writing, AUD/USD is trading 0.19% lower on the day to trade at 0.6483.