August cash rate cuts now ‘unlikely’

by Caroline Dann18 Jul 2012

A cash rate cut by the RBA in August is now unlikely, according to experts.

The assertion comes as the RBA released the minutes of its July meeting, which showed the decision to leave the rate unchanged was an ‘easy one’ for the board.
The RBA said signs of improvement in Australia’s economy, which have been growing steady for some time, meant drastic cuts were not necessary.
It’s now widely believed the ‘wait-and-see’ approach will extend to August, possibly even September.
"With a material easing in monetary policy having occurred over the preceding six months or so, and with recent signs that the domestic economy had a little more momentum than had earlier been indicated, members saw no need for any further adjustment to the cash rate at this meeting," the RBA minutes said.
Markets have now downgraded the likelihood of an August cut from 60% to 50%.
Westpac's chief economist Bill Evans told The ABC he believed the rate would eventually come down to 2.75%, just not in the next month.
"We remain of the view that the overnight cash rate will eventually come down by 75 basis points to a low of 2.75 per cent," he wrote in a note on the minutes. 
“However, due to the board's current policy disposition, it is necessary to push out the timing of the first cut from August until the fourth quarter of 2012 where we expect two cuts in October/November and December," he said.