Finance Finance News Another rate cut likely, says RBA
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Another rate cut likely, says RBA

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The Reserve Bank is likely to cut interest rates to a new low of two per cent in coming months if economic conditions continue as projected, the minutes of the most recent RBA meeting reveal.

At its March meeting, the bank chose to keep rates on hold this month following a cut in February, which took interest rates to an all-time low of 2.25 per cent.

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“In considering whether or not to reduce the cash rate further at this meeting, members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change,” the minutes, released today, said.

The board opted to wait on more data before making another rate cut, noting “the greater degree of uncertainty about the behaviour of borrowers and savers in a world of very low interest rates.”

“Taking account of all these factors, members judged it appropriate to hold the cash rate steady for the time being, while recognising that further easing over the period ahead may be appropriate to foster sustainable growth in demand while maintaining inflation consistent with the target.”

Overall, the RBA was careful not to talk down the economy, painting a picture of subdued but steady growth.

It’s most notable comments were in regard to employment, the housing market and business investment.

On employment, its forecast was downbeat: “On balance, the evidence suggested that labour market conditions were likely to remain subdued and the economy would continue to operate with a degree of spare capacity for some time.”

On the housing market, meanwhile, it forecast a continued increase in property investment, but did not say it was overly concerned by this.

“While credit had continued to grow a little faster than incomes, household leverage had not increased significantly and the Bank would continue to work with other regulators to assess and contain risks that might arise from the housing market.”

Regarding business investment, the board projected that non-mining investment “would remain subdued for some time yet and for longer than had been previously expected.”

The RBA will make its next rate decision on April 7.

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