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Reserve Bank of Australia Deputy Governor Ric Battellino said on Wednesday that the overall stance of monetary policy in Australia is now back in a "normal range" as other interest rates in the economy have overtaken hikes in the overnight cash rate.
Speaking at the Australasian Finance & Banking Conference in Sydney, Battellino pointed out that interest rates in the economy have risen by at least 100 basis points relative to the cash rate over the past couple of years. With the official cash rate currently standing at 3.75%, he noted that the current level of deposit rates, housing loan rates and business loan rates would have been consistent, before the crisis, with a cash rate of at least 4.75%.
"Taking these considerations into account, it would be reasonable to conclude that the overall stance of monetary policy is now back in normal range, though in the expansionary segment of that range," Battellino said.
"The appropriateness of this will be monitored by the Reserve Bank over the months ahead in the light of the data becoming available on economic activity and inflation."
Battellino's comments hint at a slowdown of the central bank's monetary tightening cycle and come after the minutes of the December 1 monetary policy meeting showed that the decision to hike interest rates was not clear-cut. The minutes showed that RBA Governor Glenn Stevens and the Committee saw arguments for and against this month's interest rate increase as "finely balanced".
The central bank has raised the benchmark interest rate for three straight months to bring it to 3.75%.
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