RBA ready to reduce further if required

by Mackenzie McCarty17 Jul 2013

The RBA has indicated another rate cut could easily be on the cards, thanks to a positive outlook on inflation.

In the minutes from the July meeting, released yesterday, the RBA says it opted to keep the cash rate on hold while it assessed the effects of earlier interest rate cuts and a falling Australian dollar.

“The news in recent months had generally been consistent with the outlook for growth being a little below trend and inflation remaining consistent with the medium-term target,” read the July 2 minutes.

“The most significant change had been the depreciation of the exchange rate, though members noted that it remained at a high level…Members noted that it was possible that the exchange rate would depreciate further over time as the terms of trade and mining investment declined, which would help to foster a rebalancing of growth in the economy.”

The RBA concluded that the current stance of policy was ‘appropriate for the time being’, however they indicated a willingness to drop the cash rate further if necessary.

“The Board also judged that the inflation outlook, although slightly higher because of the exchange rate depreciation, could still provide some scope for further easing, should that be required to support demand.”