SYDNEY, Sept 22 (Reuters) – The Reserve Bank of Australia (RBA) is maintaining a watchful stance on potential shifts in the economic outlook, although recent data has largely matched its projections, Governor Michele Bullock stated on Monday. Speaking during a session with legislators, Bullock noted that the central bank’s recent reductions in interest rates are anticipated to encourage household and business expenditure. However, she emphasized that global conditions remain uncertain.
“Data from the domestic economy since the August meeting have generally aligned with our forecasts, or perhaps shown slight improvement – the Board will review this and other developments at our upcoming meeting next week,” Bullock remarked.
The RBA has indicated this month that it is nearing fulfillment of its dual objectives of managing inflation and sustaining employment. Inflation is progressing toward the midpoint of the 2% to 3% target range, while the labor market is approaching full employment levels.
So far, the bank has pursued a measured and careful strategy in easing monetary policy, reducing rates in February, May, and August to reach the current level of 3.6%, following assessments of quarterly inflation figures. It has reiterated that any further adjustments will be contingent on incoming economic data.
The Australian economy expanded at its quickest annual rate in nearly two years during the June quarter, driven by a rebound in consumer spending, while inflation rose unexpectedly in July.
These developments have led investors to reassess expectations, now viewing a rate cut on September 30 as less likely. Market expectations for a reduction in November have also declined to 75%, down from being fully anticipated just weeks earlier.
Interest rate swaps currently suggest a cumulative easing of 48 basis points by mid-next year, implying fewer than two additional rate cuts.
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Australia’s central bank alert to risks over economic outlook, governor says
SYDNEY, Sept 22 (Reuters) – Australia ‘s central bank will be on alert to the risk that economic outlook may change, but the flow of data has been roughly in line with its expectations, its governor said on Monday. n nAppearing before lawmakers, Reserve Bank of Australia Governor Michele Bullock said the recent rate cuts were expected to support spending by households and businesses, but on the other side, the global environment was uncertain and unpredictable. n nSign up here. n n”Since the August meeting, domestic data have been broadly in line with our expectations or if anything slightly stronger – the Board will discuss this and other developments at our meeting next week,” Bullock said. n nThe central bank indicated this month that it was close to achieving both of its mandates, inflation and employment. Inflation was on track to return to the midpoint of the 2-3% target band, while the labour market was operating close to full employment. n nThe RBA has so far adopted a gradual and cautious approach to policy easing, having cut rates in February, May and August to reach the current 3.6% after assessing inflation data for each quarter. It has said the pace of further policy easing depends on the flow of data. n nThe economy also grew at its fastest annual pace in almost two years in the June quarter as consumer spending finally picked up, while monthly inflation unexpectedly spiked higher in July. n nInvestors saw the data as arguing against the RBA cutting interest rates on September 30, and have also pared back the chances of an easing in November to 75%, from being fully priced a few weeks ago. n nSwaps imply a total easing of 48 basis points by the middle of next year, equivalent to fewer than two more rate cuts. n nReporting by Stella Qiu in Sydney and Peter Hobson in Canberra; Editing by Muralikumar Anantharaman and Jamie Freed