Australia’s central bank board concluded that additional policy easing would probably be required over the next year when it lowered rates this month, noting that the pace could either be gradual or faster depending on incoming economic data.

Minutes from the August 11–12 policy meeting revealed that the Reserve Bank of Australia (RBA) viewed a quarter-point cut in the cash rate to 3.6% as justified, since inflation appeared to be moving toward the middle of its 2–3% target range.

They also reviewed policy strategy for the year ahead, noting that sustaining full employment while keeping inflation low and stable would probably call for additional reductions in the cash rate, Reuters reports.

The board acknowledged reasons to favour either a gradual pace of easing or a faster sequence of cuts, while stressing that the eventual path remained uncertain.

“It was important for the pace of decline in the cash rate to be determined by incoming data on a meeting-by-meeting basis,” according to the minutes.

The central bank has generally taken a cautious approach to easing, lowering rates only in February, May, and August after the release of quarterly inflation figures.

A measured pace of policy easing could be justified, given that the labour market was still relatively tight, private demand appeared to be strengthening, and there was considerable uncertainty about the level of the neutral rate.

A quicker pace of rate cuts might be required if the labour market softened and inflation risked falling short of the midpoint of the 2–3% target range.

Global headwinds, such as a slowdown in activity or renewed tensions from US trade policy, could also strengthen the case for more aggressive easing.

Markets, meanwhile, are betting that the RBA will hold off in September and instead deliver its next cut in November, bringing the cash rate down to 3.35%. Expectations are that rates will eventually stabilise near 3.10%, with the possibility of falling as low as 2.85%.

Furthermore, headline inflation slowed to 2.1% in the June quarter, while the trimmed mean measure of core inflation dropped to a three-year low of 2.7%. The labour market, meanwhile, has been gradually easing from full employment.

July saw a rebound in hiring, with the unemployment rate edging lower from a three-and-a-half-year high, easing fears that the labour market was on the verge of a sharper downturn.

The RBA noted that board members considered whether to accelerate the pace of reducing the central bank’s government bond holdings but ultimately agreed to maintain the existing approach of allowing them to mature.