MNI BRIEF: Inflation, Jobs, U.S. Policies Drove RBA Cut
MNI (MELBOURNE) - Weaker inflation and wages, and less concern over the non-market job sector alongside uncertainty over U.S. government policies drove the Reserve Bank of Australia Board to cut the cash rate 25 basis points to 4.10% at the February meeting, the published minutes showed Tuesday.
“Members noted that inflation in the December quarter had been weaker than expected: indeed, underlying inflation was already close to the midpoint of the target range on a six-month annualised basis,” the Board said, noting wages growth had also been weaker than expected. (See MNI RBA WATCH: Board Delivers Hawkish 25BP Cut)
The board also judged downside risks to economic growth were greater on balance, noting non-market sector employment was unlikely to grow as strongly. “Any slowing would weigh on overall employment unless hiring in the market sector strengthened,” the Board stated. “The recovery in consumption was also not yet assured, given uncertainty about how much the December quarter data had been influenced by discounting or promotional activity and the risk that earlier falls in real household disposable income would exert a persistent drag.”
Uncertainty around U.S. government policies was also high, the members added. “This could have a material adverse effect on the propensity of firms and possibly also households to spend. Activity in the Chinese economy was also expected to slow.”