RBA 'has room to trim interest rates'

Tuesday 18 September 2012

Article by Mozo

The minutes from the Reserve Bank of Australia's (RBA) latest meeting have now been released and they make for interesting reading.

For the third month running, the central bank opted not to lower the national cash rate, as board members deemed the existing rate of 3.5 per cent to be sufficient.

This came as a bitter disappointment for many Aussies – particularly mortgage holders and business loan customers – as they had hoped for another reduction.

However, the minutes have suggested that the RBA does have scope to slash interest rates in the near future should the need arise.

The board stated that the outlook for the Australian economy has worsened recently and there is every chance that global commodity prices could slide drastically.

Some of the nation's main trading partners – such as China – have reported poor economic data and this could weigh heavily on Australia's resources sector.

The Australian mining industry has been booming in recent years, but there are fears that the whole sector will start to slow down.

According to the RBA minutes, there was no need to cut the national cash rate in September, but the organisation is fully aware of the problems facing the economy.

"The current assessment of the inflation outlook continued to provide scope to adjust policy in response to any significant deterioration in the outlook for growth," the RBA announced.

It continued: "The board judged that, with inflation expected to be consistent with the target and growth close to trend … the stance on monetary policy remained appropriate."

RBA 'has room to trim interest rates'

The RBA has been very active in the past 12 months, as it has cut interest rates by 125 points since November 2011.

Housing industry experts had hoped that this would stimulate activity in the property sector, but it is unclear at this stage just how much impact the reductions have had.

While the uptake of mortgages has improved slightly in recent months, it seems that many Aussies are still erring on the side of caution and are unwilling to take on too much credit in the current financial climate.

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