Rate cut still alive

Port Douglas & Mossman Gazette - - FRONT PAGE -

WEST­PAC’S econ­o­mists think the Re­serve Bank is cor­rect to have left rates on hold at this week’s board meet­ing.

The cen­tral bank de­cided to leave the cash rate un­changed at 2.5 per cent. There was no change in the word­ing of the fi­nal para­graph from both the Septem­ber and Au­gust meet­ings. Pol­icy was de­scribed as ‘‘re­main­ing ap­pro­pri­ate’’ and the Board will con­tinue to ‘‘as­sess the out­look and ad­just pol­icy as needed’’. ‘‘This para­graph is con­sis­tent with the Board hav­ing a neu­tral bias,’’ West­pac’s an­a­lysts said. ‘‘We will have to await the min­utes which are re­leased on Oc­to­ber 15 to find out whether this eas­ing bias has been re­tained.’’

Gov­er­nor Glenn Stevens noted that savers are chang­ing their sav­ings pref­er­ences away from low-re­turn low-risk as­sets to higher-risk as­sets. But he did not use that ob­ser­va­tion to high­light a prop­erty bub­ble risk.

Wes­pac saw only lim­ited sup­port for its view that rates are likely to be cut again in Novem­ber. ‘‘We will need to see the min­utes of this meet­ing. There are five weeks to the next meet­ing. Over that time there will be con­sid­er­able de­vel­op­ments in cur­rency mar­kets; the labour mar­ket; in­fla­tion; con­fi­dence mea­sures and credit/hous­ing mar­kets that will de­cide whether the Board de­cides to cut fur­ther. Our fore­casts point to that like­li­hood while recog­nis­ing that it would not be a pol­icy mis­take to de­lay the de­ci­sion to De­cem­ber to ob­tain even more in­for­ma­tion around the is­sues dis­cussed above.’’

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