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(Australian Associated Press)
The Reserve Bank board has reiterated its desire to weigh the effect of recent cash rate cuts after considering the impact of unconventional monetary policy on other advanced economies.
Minutes from the board’s monthly meeting two weeks ago showed members are hoping to let June and July’s 0.25 percentage point cuts play out before intervening further.
“Having eased monetary policy at the previous two meetings, the board judged it appropriate to assess developments in the global and domestic economies before considering further change to the setting of monetary policy,” the minutes said.
Market expectations of a Reserve Bank rate cut by October have eased slightly, although at least one cut is still priced in by the end of the calendar year after the central bank acknowledged the cash rate could still be cut from its record low 1.0 per cent.
“Members would consider a further easing of monetary policy if the accumulation of additional evidence suggested this was needed to support sustainable growth in the economy and the achievement of the inflation target over time,” the RBA said.
It said it had looked at examples in other countries of stimulatory policy including very low and negative interest rates, providing longer-term funding to banks to support credit creation, and foreign exchange intervention.
“Members considered the key lessons from the international experience, noting that a full evaluation could not be undertaken as many of these measures were yet to be unwound,” the minutes said.
“Members noted that a package of measures tended to be more effective than measures implemented in isolation.”
Most economists still expect the cash rate to bottom out at 0.5 per cent next year.
“The timing and cash rate threshold for enacting such policies is uncertain but appears likely to come at or below 0.5 per cent,” NAB market economist Kaixin Owyong said.
“If we get to this point, something not envisaged by the bank’s central scenario, we would expect an expansion of fiscal policy to also be underway.”