High Australian employment makes rate cuts unlikely
Reserve Bank of Australia governor Glenn Stevens was in hawkish mood in his testimony to a parliamentary committee in Perth, causing some analysts to suggest a rate rise may be on the cards.
When asked whether the bank would be considering a rate cut, Mr Stevens rejected the idea saying inflation would have to risk undershooting the 2-3% target rather than overshooting it.
He said: "I don't think those conditions are in place, and it's a fair enough question to ask, but let me be clear, we haven't given that possibility any thought at this point, it's a bit early to be talking about cuts."
Glenn Maguire, economist at Societe Generale, said: "In the lexicon of central bankers, the comments not only indicate the bank has a strong tightening bias, they indicate a clear willingness to act upon it."
The good news for investors however, is that one of the significant factors contributing upward pressure on interest rates is the record unemployment levels in the country and Mr Stevens predicted the economy will pick up from its current "moderate growth".
Only 2 out of 26 economists questioned in a Bloomberg poll expect a rate increase this year.
< Back to latest news