The RBA changed the language of their concluding statement in the minutes of the August meeting.
The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time.
It was replaced with:
Regarding the communication of this decision, members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further. The Board would continue to examine the data over the months ahead to judge whether monetary policy was appropriately configured.
I think this reflects frustration with the market’s misunderstanding of the prior choice of words – and is an attempt to clarify that yes the RBA may cut rates further but no they do not have an imminent intention to cut.
Where does this place us? The next move is probably down, but it could be a quarter or two before they cut again.
Does this make them ‘reluctant cutters’? I do not think so. Cutting to 2.5% when they forecast a long period of sub trend growth and low inflation was a very normal thing to do, and i do not sense any reluctance in the other parts of the minutes.
What about looking forward? Even here i do not think reluctance captures it – the RBA simply has time. The interest rate sensitive sectors are lifting and the mining investment plunge has not started in earnest yet, so we are in a period where the bank may wait and see.
The RBA currently seems inclined to take that time.
If the unemployment rate rises to 6% and inflation remains around a 2% annual pace, the RBA will cut again.