RBA Keeps Cut Option as Signs Low Rates are Working

Australia’s central bank said there was “mounting evidence” interest-rate cuts were working, even as it retained the option of loosening policy to support growth in an economy battling an “uncomfortably high” currency.

“Given the substantial degree of policy stimulus that had been imparted, it was prudent to hold the cash rate steady while continuing to gauge the effects, but not to close off the possibility of reducing it further should that be appropriate,” the Reserve Bank of Australia said in minutes of its Nov. 5 meeting released in Sydney today.

Policy makers are balancing rising home prices against a high currency that’s weighing on industries such as manufacturing. GovernorGlenn Stevens and his board reduced borrowing costs by 2.25 percentage points in the past two years to a record-low 2.5 percent to boost employment-intensive parts of the economy outside of resources, where investment is waning.

Bloomberg

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