RBA happy with rates for now
(27 February 2012 – Australia) Reserve Bank of Australia (RBA) governor Glenn Stevens said the interest rate is set at the correct level for the moment during the twice-yearly parliamentary testimony on Friday.
He said economic growth was likely to be close to trend and inflation well contained throughout the next few years.
Stevens said he was well aware of the patchy nature of the economy, noting the investment boom in the resource sector and the struggling retail sector.
'But we also know that monetary policy cannot remove the forces generating different paces of growth in our economy. We have to keep our eye on the overall performance of demand and prices,' Stevens said in Sydney.
'Our most recent assessment was that, with growth near trend, inflation consistent with the target, interest rates about average and an outlook suggesting more of the same, the setting of policy was about right for the moment.'
The RBA board members said the two official rate cuts had been passed through to most other lending rates, which were now 'around average levels'.
Asked whether banks were over-profitable, Stevens said: ‘‘If I have to choose between unprofitable ones and profitable ones, I’d choose the latter’’.
‘‘You only have to look at the dimension of the bank problems in Europe to see that we don’t want banks that can’t earn a good return,’’ he said.
In its quarterly statement on policy released earlier in the month, the RBA said it felt interest rates were at the right level for now.
The bank expects inflation to stay within its target band of 2 to 3 percent for the next couple of years and analysts had assumed this benign outlook meant the RBA had more room to take out insurance against global uncertainties caused by the debt crisis in Europe.
Stevens said he was well aware of the patchy nature of the economy, noting the investment boom in the resource sector and the struggling retail sector.
'But we also know that monetary policy cannot remove the forces generating different paces of growth in our economy. We have to keep our eye on the overall performance of demand and prices,' Stevens said in Sydney.
'Our most recent assessment was that, with growth near trend, inflation consistent with the target, interest rates about average and an outlook suggesting more of the same, the setting of policy was about right for the moment.'
The RBA board members said the two official rate cuts had been passed through to most other lending rates, which were now 'around average levels'.
Asked whether banks were over-profitable, Stevens said: ‘‘If I have to choose between unprofitable ones and profitable ones, I’d choose the latter’’.
‘‘You only have to look at the dimension of the bank problems in Europe to see that we don’t want banks that can’t earn a good return,’’ he said.
In its quarterly statement on policy released earlier in the month, the RBA said it felt interest rates were at the right level for now.
The bank expects inflation to stay within its target band of 2 to 3 percent for the next couple of years and analysts had assumed this benign outlook meant the RBA had more room to take out insurance against global uncertainties caused by the debt crisis in Europe.
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