Australia c.bank says easing would be "appropriate" if jobless rate rose, inflation stayed low
* No strong case for change in rates in near term- RBA
* Chance of a higher cash rate in near-term is low - RBA
* The Aussie slips to a day's low after RBA minutes
(Adds market reaction, economist comment)
By Swati Pandey and Wayne Cole
SYDNEY, April 16 (Reuters) - Australia's central bank
believes a cut in interest rates would be "appropriate" should
inflation stay low and unemployment trend higher, though there
was still no strong case for a move in the near term.
The Reserve Bank of Australia (RBA) also sees the likelihood
of a higher cash rate in the near-term as low, marking a dovish
turn in policy compared to last month when it saw the risks for
rates to move in either direction as more evenly balanced.
Minutes of its April policy meeting released on Tuesday
showed members acknowledged the effect of an even lower cash
rate on the economy could be smaller than in the past given high
household debt and crumbling property prices.
"Nevertheless, 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," the minutes
The dovish slant sent the Australian dollar down a
third of a U.S. cent to the day's low of $0.7140.
The change in the RBA's language also lengthened the odds
for an easing later this year with a full 25-basis-point cut
expected by October.
"The minutes of the RBA's April meeting suggest that it
won’t take much for the bank to cut interest rates," said Marcel
Thieliant, Singapore-based senior economist at Capital
Economics. "We expect the RBA to cut the cash rate to 0.75
percent by early next year, starting in August."
The RBA is caught between a weakening economy led by tepid
consumer spending and a strong labour market, prompting it in
February to put an easing on the table, having kept rates at a
record low 1.5 percent since mid-2016.
In two public outings this year, RBA Governor Philip Lowe
had said there was an equal probability for the cash rate to
move in either direction depending upon how the economy panned
But the RBA changed tack on Tuesday to say: "Members agreed
that the likelihood of a scenario where the cash rate would need
to be increased in the near-term was low."
Many of the RBA's global peers, including the U.S. Federal
Reserve, have taken a marked dovish turn in recent months citing
a slowdown in world growth.
The RBA reiterated its central scenario was for further
gradual progress on both unemployment and inflation, while
emphasising that a pick-up in household disposable incomes was
"an important element" of its forecasts.
Annual wage growth of 2.3 percent in Australia is only
slightly higher than inflation which is lingering just under 2
RBA members expect inflation to remain low for some time.
First-quarter data on consumer prices index due next
Wednesday is expected to show headline inflation slowed to 1.50
percent from 1.8 percent in the previous quarter to undershoot
the RBA's 2-3 percent mid-term target.
(Reporting by Swati Pandey and Wayne Cole; Editing by Kim
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.