Central Banks

Australia's RBA weighing impact of past rate cuts on economy

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Australia's central bank said it was appropriate to leave interest rates steady this month while it assessed the impact of past easing on the economy.

In minutes of its June 2 meeting, where the Reserve Bank of Australia (RBA) kept the cash rate unchanged at a record low 2.0 percent, the central bank reiterated its view that monetary policy should be accommodative.

"Having eased policy at the previous meeting, members judged that it was appropriate to leave the cash rate unchanged and to assess information on economic and financial conditions as it become available," the central bank said, using almost identical wording in its post-meeting statement.

The minutes offered no new insight into the RBA thinking, except to reinforce the view that any further policy action will depend on how the economy unfolds from here.

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In a speech last week, RBA Governor Glenn Stevens said the bank was still open to the possibility of further easing if it would be "beneficial for sustainable growth".

Yet he also said further rate cuts alone would have limited impact on some sectors, notably business investment.

The RBA sees the economy continuing to plod along at a below-trend pace before picking up steam in the latter part of 2016. It noted that business conditions were stuck at around average levels and highlighted the spare capacity in the labor and product markets.

The central bank also repeated its long-held view that it is "both likely and necessary" for the local dollar to fall further so as to help achieve balanced growth.

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On the plus side, the RBA said low interest rates and strong population growth should underpin robust household spending. It also said while housing markets in Sydney and parts of Melbourne were very strong, the trends were more mixed in other cities.

The minutes also touched on reports that a number of banks have tightened conditions on new loans to property investors and imposed restrictions on the extent of interest rates discounts.

"Members noted that it would take some time for the full effects of such changes to be evident in the housing loan approvals and credit data," the RBA said.