Australia’s major bank cut interest rates at the beginning of August because of subdued inflation readings as well as a sense that the Australian economy had scope to growth at a faster rate.
While prospects for growth were upbeat, there was enough room for stronger growth, that could be assisted by lower interest rates. That’s what the Reserve Bank of Australia told in its minutes of August 2 policy gathering.
The RBA dared to cut interest rates during the monetary policy gathering, taking its official cash rate to a record minimum 1.50% from 1.75%. It appeared to be the second cut this year and it comes as inflation has dipped well below the expected 2% to 3% target band. The RBA’s currently foreseeing inflation will stay below the target band, until the end of 2018.
With inflation subdued, Australia’s key financial institution told there’s enough room for even faster growth rates. According to its recent forecasts, on-year GDP growth of between 2.5% and 3.5% over 2016, soaring to approximately 3% to 4% by 2018, a tempo considered to be higher than estimates of potential growth.
