RBA chief is content with record low rates

Mr Stevens was fronting the House of Representatives Economics Committee in Canberra this morning just hours after the US Federal Reserve opted to keep rates on hold at the end of its eagerly awaited September meeting.

THE head of the Reserve Bank said he is satisfied with the current domestic interest rates, all but rejecting any major changes in the near future.

The RBA governor even implied that a hard landing for China’s economy, where annual growth would drop dramatically below 7 per cent, may not be enough to trigger another interest rate cut. Reflecting these outcomes, forecasts for global growth over the period ahead are a little lower than they were six months ago.

The Fed cited recent volatility on financial markets and the risk of fallout from a Chinese economic slowdown as the key factors behind its decision to delay its first rate hike in more than nine years.

Mr Stevens warned that upcoming interest rate rises in the United States could have far-reaching effects, but acknowledged that it would sooner or later have to happen.

“There is a degree of irreducible uncertainty here and hence the possibility of further financial market volatility at some point”, Reserve Bank of Australia Glenn Stevens told a parliamentary hearing Friday.

“It’s that slope of that Federal funds rate into the future, or the anticipated slope, that will potentially affect financial markets”. “Everyone knows that, eventually, this will have to be reflected in less accommodative USA monetary policy”, he added.

“I think the evidence is starting to emerge that the very strong upward trend in approvals for lending for investors hasn’t really gone up any further for quite some time now”, he said.

“The more important factor, though, will be the pace of subsequent increases”.