More rate cuts possible:RBA

The Reserve Bank is leaving the door open for further cuts in Australia’s interest rates.

It made this clear in the just published minutes of its board meeting earlier this month.

The minutes reflected a cautious but broadly optimistic assessments for both the global and Australian economies.

But the bank also explained that its board’s decision, earlier this month, to leave rates on hold might be changed in the months ahead.

The minutes said board members had “…judged that if demand conditions were to weaken materially, the inflation outlook would provide scope for a further easing in monetary policy.”

That is an unusually frank admission, for the Reserve Bank.

The bank said, too, that while the financial situation in Europe remains “fragile,” the risk of an extremely bad outcome “seemed to have diminished somewhat over the previous couple of months.”

It said this partly reflects actions by the European policymakers.

“This, together with stronger economic data from the United States, had provided a mild boost to confidence in financial markets,” the bank added.

However the bank also admitted that “significant differences” still persist between different sectors in the Australian economy.

It said a big build up, in the nation’s investment queue, would play a key role in its economy, over coming years.

The bank said that  view of all this, its board had decided, earlier this month, to keep its cash rate on hold.

“With growth expected to be close to trend and inflation consistent with the target, the Board considered that this setting was appropriate for the overall macroeconomic outlook,” it said.