From next month, policy announcements will be made by the Bank’s new governor Philip Lowe. The minutes released today said business investment had fallen further in the June quarter, driven by a decline in mining investment, in line with earlier expectation.
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“Our judgement is that this easing in monetary policy is supporting jobs and economic activity in Australia, and thus improving the prospects for sustainable growth and inflation outcomes consistent with the medium-term target”, Dr Lowe said.
A nimble market that swings between rate cut certainty and doubt has much less faith the Reserve Bank of Australia will provide more stimulus than economists, who are largely expecting one or even two cuts in the first half of next year. The central bank appeared to be content with current labor market conditions, house price inflation, the exchange rate, and a continued improvement in commodity exports. With the nation now enjoying an unexpected boost from rebounding global commodity prices, the jobless rate falling and economic growth accelerating, some have speculated that August’s quarter-point easing may have been the RBA’s last for this cycle.
While China was in the middle of a hard economic transition, the latest data suggested it had not faced a major interruption to growth, he said.
Later, in response to questions, Lowe said it was “not particularly useful” to keep cutting interest rates in the hope that it will eventually work. Capital Economics said on Tuesday that third-quarter inflation data out late next month could feasibly prompt the RBA to cut rates again in November.
The Fed’s decision followed one by the Bank of Japan to continue loosening its policy while limiting the impact of low rates on financial institutions.
His comments came after the US Federal Reserve left interest rates unchanged on Wednesday, but strongly signalled it could still tighten monetary policy by the end of the year.
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Earlier this week Dr Lowe, after taking over from retiring governor Glenn Stevens last weekend, set a new agreement with Treasurer Scott Morrison for the operations of central bank which included keeping the long-standing inflation target of two to three per cent.
