SYDNEY (Reuters) -Australia’s central bank will be on alert to the risk that economic outlook may change, but the flow of data has been roughly in line with its expectations, its governor said on Monday.
Appearing before lawmakers, Reserve Bank of Australia Governor Michele Bullock said the recent rate cuts were expected to support spending by households and businesses, but on the other side, the global environment was uncertain and unpredictable.
“Since the August meeting, domestic data have been broadly in line with our expectations or if anything slightly stronger – the Board will discuss this and other developments at our meeting next week,” Bullock said.
The central bank indicated this month that it was close to achieving both of its mandates, inflation and employment. Inflation was on track to return to the midpoint of the 2-3% target band, while the labour market was operating close to full employment.
The RBA has so far adopted a gradual and cautious approach to policy easing, having cut rates in February, May and August to reach the current 3.6% after assessing inflation data for each quarter. It has said the pace of further policy easing depends on the flow of data.
The economy also grew at its fastest annual pace in almost two years in the June quarter as consumer spending finally picked up, while monthly inflation unexpectedly spiked higher in July.
Investors saw the data as arguing against the RBA cutting interest rates on September 30, and have also pared back the chances of an easing in November to 75%, from being fully priced a few weeks ago.
Swaps imply a total easing of 48 basis points by the middle of next year, equivalent to fewer than two more rate cuts.
(Reporting by Stella Qiu in Sydney and Peter Hobson in Canberra; Editing by Muralikumar Anantharaman and Jamie Freed)
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