Tuesday 5th July 2016 - 4:25 pm

Glenn Stevens drops a hint

by Alan Thornhill

The Reserve bank left interest rates on hold today, but hinted that there could be another rate cut soon.

 

After a meeting of the bank’s board today, its Governor Glenn Stevens noted that Australia’s inflation is low – at 1.3 per cent – and likely to remain so.

 

 

Then he added:  “Over the period ahead, further information should allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate.”

 

Mr Stevens also said:  “Several advanced economies have recorded improved conditions over the past year.”

 

However he added:  “but conditions have become more difficult for a number of emerging market economies.

 

He said:  “China’s growth rate has moderated further, though recent actions by Chinese policymakers are supporting the near-term outlook.”

 

 

The bank last cut its marker interest rate from 2 per cent, to a new record low of 1.75 per cent, in May.

 

Mr Stevens said:  “Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years.”

 

 

“Australia’s terms of trade remain much lower than they had been in recent years.”

 

He also noted the impact of Britain’s Brexit decision to leave the European Union but said nothing about Australia’s cliffhanger election, last Saturday.

 

Mr Stevens said global financial markets had been “volatile recently as investors have re-priced assets after the UK referendum.

 

 

“But most markets have continued to function effectively,” Mr Stevens added.

 

“Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative.

 

“Any effects of the referendum outcome on global economic activity remain to be seen and, outside the effects on the UK economy itself, may be hard to discern,” he concluded.


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