Jobless rise could warrant rate cut: RBA

Reserve Bank board members said a lift in the unemployment rate and stagnant inflation could warrant a cash rate cut, but current conditions did not justify reducing it from a record low 1.5 per cent this month.

The minutes of the RBA’s April 2 meeting showed board members noted the labour market had continued to improve in early 2019, though GDP growth had slowed beyond expectations.

“Members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances,” the minutes released on Tuesday said.

“They recognised that the effect on the economy of lower interest rates could be expected to be smaller than in the past, given the high level of household debt and the adjustment that was occurring in housing markets.”

The board said a lower level of interest rates could still be expected to support the economy through a depreciation of the exchange rate and by reducing required interest payments on borrowing, freeing up cash for other expenditure.

Source link Finance News Australia

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