MNI POLICY: RBA Prepared For Further Rate Cuts: Governor Lowe

By Lachlan Colquhoun 

     SYDNEY (MNI) - The Reserve Bank of Australia remains willing to cut

official interest rates further if the situation warrants, Governor Philip Lowe

said Tuesday.

     Lowe, speaking ahead of a policy meeting next Tuesday, said that the Board

would "again take stock of the evidence" when it meets to make its decision on

interest rates, although he did not specifically say the Bank would cut next

week.

     "Further monetary easing may well be required," Lowe told the Armidale

Business Chamber.

     "While we are at a gentle turning point and expect growth to pick up, the

strength and durability of this pick up remains to be seen."

     The RBA cut official rates by 25 basis points in June and again in July,

bringing them down to a record low of 1%.

     The market is pricing in one, and perhaps two more similar sized cuts by

mid-next year, with many analysts forecasting a cut next week.

     --EXTENDED PERIOD

     In his speech, Lowe repeated the RBA view that an "extended period of low

interest rates will be required" in Australia to make progress in reducing

unemployment and achieving progress towards the inflation target.

     Unemployment rose last week to 5.3%, even though employment grew by more

than 30,000, while inflation is at 1.6% against a target of between 2% and 3%.

     Much of Lowe's speech in Armidale repeated his recent comments and those in

the RBA's September Statement on Monetary Policy, but for the first time he

spoke of what he said were signs of a "gentle" economic recovery attributed to

the impact of lower rates, a stabilised housing market, and infrastructure

spending.

     "Looking forward, there are some signs that, after a soft patch, the

economy has reached a gentle turning point," he said.

     "This is evident in the fact that GDP growth over the first half of this

year was stronger than it was over the second half of last year.

     "We are expecting a further modest pick-up in the quarters ahead."

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MMLRB$,M$A$$$,M$L$$$,MT$$$$]