"RBA minutes hint at rate cut"

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I came across this that I'm sure all home owners with a mortgage will like to hear!

AN interest rate cut is still on the cards for May 1, after the release of the minutes of the latest monetary policy meeting.   

The Reserve Bank of Australia's (RBA) April 3 board meeting minutes, released today, echo the message in the announcement on the day.

That message is: the economy has grown a bit slower than expected, with inflation still expected to stay in the two to three per cent target range over the coming year or so.

The minutes also repeated the view that, despite the slower economic momentum and its implication of reduced risks of rising inflation, it would be a good idea to wait to see how the inflation figures panned out before considering a move in the cash rate.

The March quarter consumer price index (CPI) figures, due for release on April 24, will be seen by RBA-watchers as the make-or-break event for a possible rate cut when the central bank's board gets together on the first Tuesday of May.

The minutes also acknowledged the interest rate cuts late in 2011 - which lowered the cash rate from 4.75 per cent to 4.5 per cent in November and then 4.25 per cent in December - but said things had changed in the meantime.

"Since then, (board) members had lowered their assessment of the pace of growth somewhat," the RBA said.

The growth in gross domestic product (GDP) reported in the December quarter national accounts had been less than expected, it said.

"If slower growth in demand could be expected to result in a more moderate inflation outcome, then a case could be made for a further easing of monetary policy."

In the minutes, the RBA said the board would have the chance to review the inflation outlook, based on new data on prices as well as demand and output data, at the next meeting.

"Members judged it prudent to evaluate those data before considering a further policy adjustment," the minutes said.

The minutes also showed that the board had spent "some time" mulling over the weakness in the housing sector.

As well, as has been customary for the RBA of late, the minutes noted that the Australian dollar remained high despite the decline in the terms of trade, the ratio of export prices to import prices, something that would ordinarily put downward pressure on the currency.

Those two factors, along with some rises in bank lending rates independent of the RBA's stance, would seem to improve the chances of a rate cut in May.

The Reserve Bank clearly is not 100 per cent convinced. It warned that the benign inflation outlook depended on an improvement in productivity growth.

Even so, the tone of the minutes suggests fairly strongly that a rate cut is much more likely than not next month.

This information was gathered from:
http://www.news.com.au/money/interest-rates/slow-demand-could-lead-to-rate-cut-rba/story-e6frfmn0-1226329935731

DEB BRADY
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