The Reserve Bank of Australia is willing to ease monetary policy further if needed and rates are set to remain low for an extended period, Governor Philip Lowe said Tuesday.
However, negative interest rates are extraordinarily unlikely, he said in Canberra. "It is likely though that we will require an extended period of low interest rates to reach full employment and for inflation to be consistent with the target," Lowe said. The central bank had reduced its key interest rates three times this year. The cash rate, at 0.75 percent is the lowest on record.
There is no automatic mechanical link between what is happening elsewhere and own monetary policy, he said. At each meeting, the RBA takes decision which is best for the Australian economy and for the welfare of the Australian people, Lowe added.
Lowe said he is confident that these reductions are helping the economy and supporting the gentle turning point in the economic growth.
However, Lowe said, "We recognise that monetary policy is not working in exactly the same way that it used to." Low interest rates are hurting the finances of people relying on interest income.
The governor observed that the focus needs to be on improving investment environment which would assist with a return to more normal interest rates.