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MNI BRIEF: Rates First But Not Only Weapon For RBA-Harper

(MNI) LONDON
SYDNEY (MNI)

Interest rates remain the first weapon of choice for the Reserve Bank of Australia, despite limited space for further cuts, but it could still ease via further balance sheet expansion, board member Ian Harper told MNI Wednesday.

"The notion that monetary policy is exhausted when the cash rate has reached or is close to reaching the effective lower bound is false," Harper said, adding that while the cash rate remains the next item in the central bank's "armoury", it is hardly "the only weapon at its disposal".

Options include targeting rates further along the yield curve, said Harper, speaking in a private capacity and not for the RBA. He noted a central bank could theoretically expand its balance sheet without limit, although there would be costs as well as benefits to any such action.

MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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