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Market Overview
RBA May Consider Cutting Interest Rates
The Reserve Bank of
Australia’s (RBA) Governor, Philip Lowe gave a speech about the economic
outlook and monetary policy to the Economic Society of Australia today, after
the RBA released its latest meeting minutes.
The highlight of the
speech was a suggestion that the bank could consider easing monetary policy at
next month’s meeting in order to drive faster hiring and take unemployment below
five per cent.
Lowe mentioned in his
speech that “the Australian economy can support an unemployment rate of below
five percent without raising inflation concerns. This would be consistent with
experiences overseas, with many other advanced economies sustaining lower rates
of unemployment than previously thought possible without leading to a
noticeable uplift in inflation.”
The question was then
how can the Australian society achieve and sustain a lower rate of
unemployment? Even though the labour market has proved to be strong over recent
times, the latest data shows that this may not be the case in the near
future. For this reason, the governor stated
that “a lower cash rate
would support employment growth and bring forward the time when inflation is
consistent with the target. Given this assessment, at our meeting in two weeks'
time, we will consider the case for lower interest rates.”
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