Governor Lowe had a foot in both camps when he addressed the Citi Australia and New Zealand Investment Conference, noting that while the board had not yet made a decision on another cut there was still a case to be made for slashing rates to a record low of 0.1 per cent.
“When the pandemic was at its worst and there were severe restrictions on activity we judged that there was little to be gained from further monetary easing,” Governor Lowe said.
“The solutions to the problems the country faced lay elsewhere. As the economy opens up, though, it is reasonable to expect that further monetary easing would get more traction than was the case earlier.”
But while Mr Lowe noted that further easing could put more people in jobs and help private sector balance sheets, it needed to be weighed against the international monetary policy paradigm and the impact it would have on people who rely on interest income. And while some RBA watchers have seen the speech as more evidence of a November cut, others aren’t so sure.
“On balance I think Governor Lowe’s speech reduced the chances of a rate cut in November. There was clearly no strong signal that the bank would cut rates, but also no strong signal they it won’t,” BetaShares chief economist David Bassanese told Investor Daily.
“The RBA is still debating internally whether more stimulus is needed, and what would be the most effective means of delivering that stimulus. My sense is that Lowe’s acknowledgement that the bank needs to keep an eye out on global monetary developments means it may well save what little ammunition it has left and pull the trigger when and if other central banks ease policy further.”
