The RBA has signalled that another rate cut is possible, but says it is not going to happen soon. Source: AAP
THE Reserve Bank is inclined to make another interest rate cut, but it doesn't look like it will happen soon.
"Members agreed that the Bank should neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them," the RBA said in the minutes of its September 3 board meeting.
The central bank said June quarter economic growth was a little below trend, but housing market conditions were continuing to improve in more recent months in response to low lending rates.
The RBA last reduced the cash rate in August, by quarter of a percentage point, to a new record low of 2.5 per cent.
It said the historically low lending rates and the lower Australian dollar are continuing to provide a substantial degree of stimulus to the economy.
The RBA said this would help the Australian economy negotiate its transition away from being driven by investment in resources.
JP Morgan economist Ben Jarman said the RBA did not want to declare an end to its cycle of reducing the cash rate, but stopped short of saying there was scope to cut further.
"The minutes struggled to get very excited about the progress achieved so far," he said.
"Officials are not totally defeatist, and still are putting emphasis on monetary policy's long and variable lags."
The decision to cut the cash rate again will be dependent on future economic data and how far the Australian dollar will fall, Commonwealth Bank economist Diana Mousina said.
But she added that 2.5 per cent will be the low point for the cash rate in this easing cycle.
"On balance, the economy is progressing at a pace in line with the RBA's expectations. So a rate cut is not imminent," Ms Mousina said.
"We also suspect that policy makers would prefer to see any further easing in monetary conditions to come via a lower Aussie dollar."
The release of September quarter inflation figures on October 23 - two weeks before the RBA's Melbourne Cup day board meeting - is one of the key pieces of economic data to be released in the coming months.
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