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RBA says further rate cuts possible

The Australian has report that The Reserve Bank of Australia has held out the possibility of a further interest rate cut but indicated a move was not imminent.

The RBA made that point clear in the minutes of its October 1 board meeting by repeating a line, word for word, from the September minutes.

“Members agreed that the bank should neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them,” the RBA said on Tuesday.

The central bank last reduced the cash rate in August by quarter of a percentage point to a new record low of 2.5 per cent and cut by the same amount before that in May.

The RBA said the effect of historically low lending rates was evident across a range of economic indicators and still had further to run.

“House prices and turnover had increased and leading indicators pointed to a pick-up in dwelling investment over the period ahead,” the central bank said.

“While credit growth remained moderate, there were signs of an increased appetite for borrowing, most notably among investors.”

The Australian report also mentions the RBA said international economic conditions had improved recently, with Chinese growth getting stronger and there were signs of the US economy continuing to grow at moderate pace.

“The data for the global economy had been a bit more positive of late and broadly consistent with growth of Australia’s major trading partners remaining around its long-term average,” the RBA said.

The minutes made only brief mention of the stalled US budget negotiations, which resulted in the US government shutting down during the afternoon after the RBA’s October 1 board meeting ended.

The bank said that Australian economic growth remains a little below average, with investment in both the mining and non-mining sectors staying subdued.
“Businesses had been reluctant to take on new risks, and mining investment had turned down,” the RBA said.

“Growth of household consumption had been below average, consistent with subdued conditions in the labour market and softer growth of wages.

“Consumer confidence was above average levels and business confidence had increased, although it remained to be seen if this would be sustained,” the RBA minutes said.

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