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Tuesday, June 19, 2012
RBA never considered cutting 50--and June not justified by Aussie economy
Westpac: The Minutes to the Board meeting of June 5, which resulted in a 25bps cut in the policy rate to 3.50%, imply very strongly that a large cut was not countenanced, and that if the decision was being made solely on domestic grounds, a cut would not have been delivered. The rationale seems to have been that there were enough elements of resilience in the domestic figures for the Bank to take some time to assess the impact of past easing on activity, but that with the potential for global tensions to “intensify” precautionary behaviour, the “finely balanced” arguments turned in favour of a cut.
HSBC: Today’s minutes reiterated that the 25bp cut in June was insurance against the possible effect of weakening global conditions, which was afforded because inflation is expected to remain low. In their view, local conditions had not significantly weakened. They also told us that the RBA viewed the decision to cut rates on 5 June as ‘finely balanced’. We agree. As we noted before the meeting, our view was that local conditions did not warrant a further cut in interest rates. The minutes seem to suggest that on local conditions alone, they would probably have left rates steady. But, the cut was in response to weakening global conditions.
ANZ: The Minutes of the RBA’s June Board meeting noted that the arguments were ‘finely balanced’ between a modest rate cut and no change in policy... Combined with recent comments by Governor Stevens, the Minutes suggest that the RBA is not in a particular hurry to ease policy further... Notably, the Minutes highlight that there had not been time to assess the effects of earlier reductions in the cash rate and that the cumulative easing to date will provide ‘a measure of stimulus…to the domestic economy over the coming months’.