The RBA board minutes on Tuesday is likely to be dominated by a discussion of the May interest rate cut, with the RBA likely to be concerned about the pace of recovery in non-mining activity, particularly business investment. The RBA is also likely to be frustrated by the high real exchange rate and may toughen its language on the currency. “The February experience indicates that the RBA may not say much about its post-cut policy stance, although it has an easing bias, given that its updated outlook showed that average inflation next year was expected to undershoot the midpoint of the RBA’s 2-3% target band”, says Barclays. History shows that it is rare for the RBA to forecast an undershoot, although past instances of an expected undershoot did not guarantee a cut.
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