RBA offers no guarantees of further cuts The Australian dollar ticked higher after the release of the minutes on the Reserve Bank's July rate-setting meeting because they contain no serious hint that the central bank's board is poised to cut its cash rate when it next meets, on August 6. The minutes reflect the board's views on the day of the July meeting. They are not updated to take subsequent events into account. What they suggest however is that the board is happy to wait a while to see whether the cash rate it left unchanged at its July meeting, 2.75 per cent, is low enough, particularly given the recent fall in the value of the Australian dollar. The picture the minutes paint is a familiar one for Reserve Bank watchers. Economic growth overall is a bit below the long-term trend, and the outlook for a baton-pass from resources investment to non-resources investment, jobs growth and demand growth remains uncertain. However, the impact of cuts that lowered the cash rate from 4.75 per cent between November 2011 May 2013, including quarter of a percentage point cuts last December and in May this year, are apparent across a range of indicators including the housing market. When it met on July 2 the board felt that "given the lags involved in the transmission of monetary policy, this process had further to run." The fall in the value of the Australian dollar was also a significant event in the board's opinion, although the board believed the $A was still high by historical standards. The board felt the currency's decline did not raise inflationary expectations enough to threaten the board's 2 per cent to 3 per cent inflation target (inflation is running smack in the middle of that range), and it was of the view that the $A could fall further as the resources boom cooled, Australia's terms of trade weakened and mining investment declined. If it happened, it would "help to foster a rebalancing of growth in the economy," by boosting the non-resources sector. The picture painted is of two processes that are boosting demand as they unfold: cash rate cuts that the Reserve believes are still feeding through the economy to lower debt-servicing costs and boost sentiment, and a decline in the value of the $A that if sustained or magnified will make exporters more price-competitive in their overseas markets, and make imports less price competitive here. Given that the processes are still unfolding, and with "substantial" monetary stimulus already in place, members considered the cash rate status quo to be appropriate, the minutes report, echoing the minutes from a month earlier. The minutes also state, as they did a month earlier, that there is "some scope" for further easing should it be needed. There is however no heavy hint that the board is going to cut again as soon as its next meeting in August - no guarantee in fact that it will cut again at all.