RBA is Willing and Able to Ease

Australia’s central bank is willing to cut interest rates again if needed, but is cautious about the likely impact on house prices and debt levels, a top policy maker said on Monday.  Speaking in New York, Reserve Bank of Australia (RBA) Governor Glenn Stevens also reiterated that the Australian dollar was “very likely” to fall further over time.

The central bank cut interest rates to a record low of 2.25 percent in February, but it surprised many analysts by skipping further moves at its policy meetings in March and April.  “The (RBA) Board has clearly signalled a willingness to lower it even further, should that be helpful in securing sustainable economic growth,” Stevens told the American Australian Association.

“The Board has been proceeding with a degree of caution that is appropriate in the circumstances,” he added, “It also has, I would say, a realistic assessment of how much monetary policy can be expected to achieve in supporting the adjustment the economy needs to make.”  Financial markets imply around a 50-50 chance of a cut to 2 percent at the RBA’s next meeting on May 5, having lengthened the odds after a surprisingly strong jobs report out last week.