RBA Saw Improving Economic Signs, Need To Balance Risks

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Reserve Bank of Australia board members saw a brightening economic picture this month, and said a move to tighten monetary policy would involve a delicate balancing act.

Minutes of the August 4th meeting were released Tuesday in Sydney.

Members felt that reversing the current low interest policy would involve balancing two risks.

"There was a risk of overstaying a very accommodative setting in a recovering economy, particularly when underlying inflation still needed to decline to reach the target," the minutes said. "On the other hand, there was a risk of an early tightening choking off confidence and demand prematurely."

At that meeting, the board left Australia's Official Cash Rate unchanged at 3.0 percent.

The board said a particular source of uncertainty was whether recent growth in household spending was the result of temporary fiscal measures. a more general decline in risk aversion or "the more persistent effects of lower interest rates."

The board also acknowledged "a material improvement in conditions in financial markets over the past month, especially in the two weeks leading up to the meeting."

(Market News Provided by RTTNews)