SYDNEY Australia's central bank wanted to leave open the possibility of further policy easing when it cut rates earlier this month, though without signaling any immediate intention to act.
Minutes of the Reserve Bank of Australia's August policy meeting offered a form of limited forward guidance that was rare for the conservative central bank.
"Regarding communication of this decision, members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further," minutes of the August 6 meeting showed.
At the meeting the RBA's Board chose to cut its cash rate a quarter point to a record low of 2.5 percent, citing subpar economic growth and restrained inflation.
Ironically, the bank's statement announcing the cut was taken by markets as lessening the chance of a further easing since it did not expressly state that there was scope for such a move.
It even led some analysts to judge that the central bank had moved to a neutral stance on policy, rather than having an easing bias.
Futures markets have since scaled back expectations of another cut by year-end, putting the probability at around 60 percent.
The RBA said the course of the Australian dollar would be important for the policy outlook. While the currency had fallen sharply since April, it was still "high by historical standards," the minutes showed.
It was possible the currency could fall further and help the economy deal with a peak in mining investment, the minutes showed.
The Board also judged that while the drop in the dollar would likely add to prices for tradable goods and services over the next few years, inflation would still remain within the bank's long term target band of 2 to 3 percent.
At the same time, the RBA had trimmed its forecast for economic growth over the next year or so, due in part to subdued consumer spending and weak business confidence.
"On balance, with growth expected to remain below trend for longer and inflation to remain within the target even with the effects of a lower exchange rate, members concluded that a lower level of the cash rate would better contribute to achieving sustainable growth," the minutes showed.