The Reserve Bank of Australia left its key interest unchanged at 4.75 percent at its policy meeting and retained a balanced, sanguine assessment of the impact that the troubles in Europe and the United States will have on other parts of the world.
“Thus far, indications are that economic activity is continuing to expand in China and most of Asia,” Glenn Stevens, the governor of the bank, said in a statement
.
Nonetheless, global markets continued to be “very unsettled,” and global growth prospects have weakened, he said.
This, Mr. Stevens noted, also has also reduced inflation pressures within Australia, which could “increase the scope for monetary policy to provide some support to demand, should that prove necessary.”
That comment was widely interpreted by analysts as a subtle, but significant, shift in the stance of the Australian central bank.
The central bank has kept interest rates unchanged for nearly a year now, after a succession of rate increases in late 2009 and 2010, as the country’s economy recovered from the global turmoil set off by the collapse of Lehman Brothers in September 2008.
The “half-signal” that the central bank is open to easing monetary policy does not indicate that the Reserve Bank of Australia currently sees “an urgent or potential need to relax policy conditions yet,” commented Joseph Lau, a regional economist at Société Générale in Hong Kong.
But, he added, “this is the first indication that R.B.A. was willing to respond to a weaker growth trend, and not just as an emergency response to an external shock.”
The shift in the central bank’s stance highlighted the fact that economies in the Asia-Pacific region are beginning to feel the effects of the financial woes in other parts of the world.
The global uncertainty has prompted central banks across much of the region to keep interest on hold in recent weeks, rather than raising them further. And although Asia’s economies remain robust — and generally less indebted — than those in the West, the pace of growth has slowed.
Asian stock markets, meanwhile, have been dragged down by the global nervousness. In Luxembourg, the finance ministers made it clear early Tuesday that Greece was now unlikely to receive €8 billion, or $10.6 billion, before November, putting pressure on Greece to carry out reforms.
“Both business sentiment and financial markets currently stand at a pivotal point, with investors wondering whether the near-term outlook is for a rebound similar to 2010 or a dangerous spiral of 2008,” analysts at Barclays Capital said in a research note on Tuesday.
After sharp falls on Monday, most stock markets in Asia saw milder declines Tuesday. In Japan, the Nikkei 225 closed 1.1 percent lower. The benchmark index in Australia slipped 0.6 percent.
The Kospi in South Korea, playing catch-up after a holiday, plunged 3.6 percent.
In Singapore, the Straits Times index was 1.5 percent lower by midafternoon, and the Hang Seng slipped 0.7 percent. Mainland Chinese markets are closed this week for holidays.
Article source: http://www.nytimes.com/2011/10/05/business/global/australian-central-bank-signals-it-is-open-to-rate-cut.html?partner=rss&emc=rss