RBA minutes leave door open for future rate cuts: Westpac

Westpac believes the Reserve Bank of Australia board meeting minutes reveal that there is “ample scope to cut rates further”, with the timing determined by financial developments in Europe.

Westpac chief economist Bill Evans says the RBA’s commentary “clearly leaves the door open for further rate cuts”.

Westpac has been expecting a further 75-basis-point cut in this cycle, with its forecast that the next move would be February, rather than December.

Evans suggests one of Westpac’s reasons for expecting a delay to the next move had been around the RBA’s concern to confirm the sharp slowdown in underlying inflation.

Evans says given the huge emphasis that the RBA has placed on downside risks to the global economy as justifying the cut in November, December’s decision will hinge on global developments.

“We remain comfortable with our original view but can easily see circumstances which would bring the decision to cut rates by 0.25% forward from February to December,” Evans says.

“As the financial developments in Europe evolve over the next few weeks this picture will become quite clear,” Evans suggests.