The Reserve Bank is cautious about future cash rate cuts and doesn’t view last month’s decision to reduce the official interest rate level as a commitment to make further reductions, according to the minutes of the bank’s recent board meeting.
The 18 February meeting minutes, released on Tuesday, deflate the hopes of mortgage holders of another quick-fire reprieve in lending rates. They also appear to make another pre-election rate cut less likely.
The minutes show that the RBA board “was not yet assured” inflation could be returned to the target range with a lower cash rate.
“As a result, members expressed caution about the prospect of further policy easing, which could also be seen in the forecast for inflation based on the market path,” the minutes said. Policy easing typically refers to rate cuts.
The RBA cut the cash rate by 25 basis points to 4.1% at its February meeting, representing the first reduction since early in the pandemic.
Given rate changes are often part of a series – as they were on the way up – the change could have signalled the start of a new cycle, with some economists at the major banks anticipating a further three cuts this year.
The minutes show that while the RBA opted to cut the cash rate due to concerns that higher borrowing rates could have adverse effects on the economy, the decision was not a sure sign that more would follow.
“In light of these considerations about the risks surrounding the board’s decision, members agreed that their decision at this meeting did not commit them to further reductions in the cash rate target at subsequent meetings,” the minutes stated.
The meeting minutes were in line with the cautionary tone adopted by the RBA governor, Michele Bullock, who has pushed back against expectations of a series of cuts.
Bullock has said the RBA was keeping a close eye on the jobs market, which was proving resilient and not necessarily in need of a rate cut stimulus.
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She has also said that Donald Trump’s tariffs were creating uncertainty over the economic outlook.
Global equity markets have been rattled in recent days over Trump’s tariffs policy, which includes an extra levy on China. The volatile period has made forecasting more difficult.
The market is pricing in a 14% chance of another 25 basis point decrease at the next RBA meeting, on 1 April, according to the ASX’s rate indicator which tracks expectations through the pricing of cash rate contracts.
Article by:Source: Jonathan Barrett Business editor
