The Reserve Bank of Australia released the May policy meeting minutes today explaining why the bank was more aggressive in its decision to cut rates by 50 basis points rather than 25 basis points on May 1. The board made the decision based on Weaker-than-expected domestic GDP growth and inflation outcomes.
There is more likelihood for a further rate cut as early as June as the RBA may decide to be pre-emptive and move in front of the curve is to respond to global developments, namely the deepening euro Zone crisis and its adverse implications for Australia’s key trading partners such as China.
The recent turn of events mean that Chinese and global developments will be watched more closely
than usual; any sign of more severe weakness overseas will tend to lift the need for an RBA rate cut soon.
After the policy meeting minutes were released, the aussie dipped to a fresh five-month low of $0.9943 against the US dollar. AUDJPY fell to 79.37 yen.