Are further interest rate cuts on the cards?

Interest-RatesThe minutes of the Reserve Bank’s July meeting have been released and it shows no signs of interest rates being cut… not just yet anyway. 

The RBA will continue to assess market conditions over the next couple of months, in particular to assess whether there has been any impact from the ongoing debt crisis in Greece or the volatile Chinese stock market, however at present any potential fallout has been regarded as “relatively limited”.

In fact, the Australian economic picture has remained fairly consistent. The labour market has improved slightly and inflation remains well contained. Economic growth was also shown to pick up in the March quarter.

However the RBA warned that it doesn’t all look so bright, and that while growth in the March quarter had been stronger than expected it doesn’t look like this has carried through to the June quarter.

The Australian dollar remains one of the key concerns for the central bank. Despite the AUD depreciating by around 10 per cent against the USD since the beginning of the year, the dollar has “offered less assistance than would normally be expected in achieving balanced growth in the economy”.

The RBA will continue to monitor the Australian dollar and remarked that “a further depreciation is both likely and necessary.”

Depending on how the economy performs over the next couple of months, the RBA may be forced to cut the cash rate again at some stage, however it looks like it will remain at the record low of 2 per cent for a little while longer yet.

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