Reserve Bank holds rates but doesn’t rule out a future cut
■ The Reserve Bank has given itself room to cut interest rates, despite holding them steady at 2 per cent for the sixth consecutive month last week.
Markets had put the chance of a rate cut at 50-50, in part because of the big four lenders lifting their mortgage rates and figures showing inflation edging down to very low levels.
But it was comments by Reserve governor Glenn Stevens that lifted expectations the bank may move on rates — either next month or early next year.
He said while there were some positive economic signs, there was scope for lower rates given the lack of price pressures across the country.
“(Board) members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand, ” he said.
Mr Stevens played down the rate rises by the major banks, saying their actions would reduce demand in the housing sector but only marginally.
CommSec chief equities economist Craig James said the Reserve was taking out insurance by explicitly mentioning there was scope to cut rates if necessary. Second-tier lender Bendigo and Adelaide Bank said it would lift its standard variable mortgage rate by 0.12 percentage points to 5.68 per cent.
Reserve Bank Governor Glenn Stevens.