The RBA Is Confident That Monetary Policy Is Working

Getty / Cameron Spencer

The RBA today released its quarterly Statement on Monetary Policy. In the introduction it is made clear it believes the Australian economy is healing, and monetary policy is working – even if it is with a lag.

It’s an upbeat assessment of the economy if ever there was one.

And while the RBA will not close off the possibility of further rate cuts, that will only happen if the economy falls in a hole.

Here is the important part from the SoMP –

Since the August meeting, there has been further evidence that this cumulative easing in monetary policy is supporting activity in interest-sensitive sectors. Monetary policy acts with a lag, and so the effects of the reductions in the cash rate on activity still have further to run. The stimulus is clearly evident in the housing sector, where prices have accelerated a little in recent months, borrowing is rising a little faster and indicators of construction are moving higher. Also, savers continue to shift towards assets with higher returns and risk, and measures of business and consumer confidence have moved higher to above average levels. So although growth is forecast to remain a bit below trend for a time, there is a reasonable prospect that private demand beyond the resources sector will strengthen over time. Meanwhile, the outlook is for inflation to remain consistent with the medium-term target.

At the meetings since August, the Board judged that given the substantial degree of monetary policy stimulus that had already been put in place, it was appropriate to hold the cash rate steady, but not to close off the possibility of reducing it further, should that be needed to support economic activity consistent with the inflation target.

The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.