The minutes of the RBA’s May monetary policy meeting will be released this morning.
Here’s the state of play.
- At this meeting the RBA cut its cash rate to 2.00%, the lowest level on record.
- The RBA dropped its explicit easing bias in its policy statement, suggesting to some that its easing cycle is over. As was the case in February, a meeting where it dropped the cash rate to 2.25% from 2.50%, the minutes are likely to convey an implicit easing bias rather than an outright statement that rates could be reduced further.
- Specific mention was made on the outlook for business spending. This, along with subdued labour market conditions and a benign inflation outlook, is widely believed to be the main catalyst behind the cash rate being reduced.
- On the Australian Dollar the RBA stated “further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices”. This was more forceful than previous statements and suggests the board is becoming increasingly uncomfortable with its elevated level.
- The Australian Dollar has appreciated, both against the US Dollar and in trade-weighted terms, from where it was trading prior to the first RBA rate cut this year on February 3.
- Market pricing for a 0.25% rate cut in June currently sits at just 4%. Looking ahead to August, after the RBA receives the next quarterly inflation report from the ABS, the odds increase to around 40%.
The minutes will be released at 11.30am today in Sydney.
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