Australian central bank signals interest rate cuts unlikely

Sydney, July 16 (IANS) The Australian central bank has signalled that the falling Australian dollar could reduce the chance of an interest rate cut in August, according to a bank document released Tuesday.

In the minutes of the Reserve Bank of Australia's July monetary policy meeting, the bank identified the falling dollar as "the most significant change" in economic conditions in recent months, reported Xinhua.

"On a trade-weighted basis, the Australian dollar was around 12 percent below the high reached in early April and close to its lowest level since September 2010," the bank said in the minutes.

"Overall, domestic financial markets viewed the lower exchange rate as reducing the need for monetary policy to be eased further, with the market at the time of the meeting attaching a 25 percent probability of a decline in the cash rate occurring in July, with only a single reduction expected by the end of the year."

While the bank forecasts inflation to remain consistent with its target range of 2 to 3 percent, it has softened its tone in the minutes on the likelihood of a rate cut at its August board meeting.

"The board also judged that the inflation outlook, although slightly higher because of the exchange rate depreciation, could still provide some scope for further easing, should that be required to support demand," the minutes said.

But some economists believe an interest rate cut in August is still likely.


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