Oceania > Australia > RBA Says Low Rates Underpin Consumption

Australia: RBA Says Low Rates Underpin Consumption

2016/02/16

The Reserve Bank of Australia said the record low interest rate is supporting household spending increase and housing investment , and the weaker currency boosts request for domestic production.

The increase in employment as well supported household consumption increase, RBA said Tuesday in the minutes of February monetary policy conference.

Nonetheless, members said the strength of employment over the completed year in conjunction with below-average GDP increase created some uncertainty about the outlook for the labor market.

"Members noted that recent domestic data had, on balance, been positive and judged that there were reasonable prospects for increase to increase gradually over the estimate period while maintaining inflation close to target," the minutes said.

At the conference, the bank left its cash rate unchanged at a record low 2.00 %.

The board observed that the outlook for continued low inflation may provide scope for easier monetary policy, should that be appropriate to lend further support to request.

 

The minutes repeat the "soft easing bias" stance, Bill Evans at Westpac Institutional Bank said.

The minutes, however, suggest that at the moment the board does not believe that further support will be necessary and it will take some months to determine whether that approach should change, the economist noted.

Regarding the Chinese yuan, policymakers observed that one aspect of market concern was uncertainty about the Chinese authorities' intentions for the next price of the renminbi.

"The challenges for the Chinese authorities in managing the exchange rate in the face of depreciation pressure from private capital outflows," the minutes said.

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