Borrowers may have to wait until at least Melbourne Cup day for the next interest rate cut from the Reserve Bank of Australia.
The central bank has made it abundantly clear that it won’t cut the cash rate in the next couple of months, partly because the falling Australian dollar is helping the economy.
RBA last cut the cash rate by a quarter of a percentage point to a new record low of 2.5 per cent at its August 6 board meeting.
The meeting’s minutes, released on Tuesday, contained unusually blunt language on the possible timing of future RBA decisions.
“Members agreed that the bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates,” the RBA minutes said.
“The board would continue to examine the data over the months ahead to judge whether policy was appropriately configured.”
The RBA said local economic growth was likely to stay below average over the coming year before picking up, partly because of the recent fall in the Australian dollar.
The Australian dollar has fallen 15 per cent since April and currently stands just above 91 US cents, but the RBA said the exchange rate was still high by historical standards.
The currency has averaged 75.5 US cents since it was floated in December 1983.
UBS Australia chief economist Scott Haslem said the minutes showed the RBA has a “somewhat reluctant easing bias”.
“The most interesting statement of the day was that the RBA raised the importance of the exchange rate in the rates decision,” he said.
“The RBA would prefer a lower Australian dollar to ease financial conditions, rather than have to cut rates further from here.”
Mr Haslem said the central bank is unlikely to move until after September quarter inflation figures are released on October 23.
“Like the rest of us, they are just watching the data,” he said.
“Their desire not to signal an imminent intention, nonetheless suggests they are unlikely to adjust rates at their September or October meetings, ahead of the next inflation print, making November the next live meeting.”
ANZ chief economist Ivan Colhoun said the RBA’s minutes showed there won’t be an immediate follow up reduction to the August cut.
“The inflation outlook was contained even with the recent depreciation of the Australian dollar,” he said.
“This suggested no reduction in the bank’s scope to ease policy.
“The bank repeated that the course of the Australian dollar would be important in this regard, reinforcing our interpretation that monetary policy moves are increasingly Australian dollar dependant.”