Interest rates are “normal”: RBA

Interest rates are officially heading back towards ‘normal territory’, according to the RBA’s deputy governor Ric Battellino.

Speaking at the 22nd Australasian Finance and Banking Conference yesterday, Mr Battellino said the cash rate, which is currently 3.75 per cent, is still 50 basis points below the previous cyclical low of 4.25 per cent recorded in 2001.

"On the surface this might suggest that the cash rate is still unusually low. However, with other interest rates in the economy having risen by at least 100 basis points relative to the cash rate over the past couple of years, they are now above their previous cyclical lows,” he said.

According to Mr Battellino, the increased cost of wholesale funding and strong competition for deposits has pushed up commercial interest rates relative to the official cash rate.

"Taking this into account, it would be reasonable to conclude that the overall stance of monetary policy is now back in the normal range, though in the expansionary segment of that range," he said.

Mr Battellino’s comments came after the Australian Bureau of Statistics (ABS) showed that the Gross Domestic Product (GDP) had enjoyed marginal growth in the September quarter, suggesting the RBA may keep rates on hold when they meet in February.

According to data from the ABS, the GDP increased by 0.2 per last quarter.

Interest rates are officially heading back towards ‘normal territory’, according to the RBA’s deputy governor Ric Battellino.

Speaking at the 22nd Australasian Finance and Banking Conference yesterday, Mr Battellino said the cash rate, which is currently 3.75 per cent, is still 50 basis points below the previous cyclical low of 4.25 per cent recorded in 2001.

"On the surface this might suggest that the cash rate is still unusually low. However, with other interest rates in the economy having risen by at least 100 basis points relative to the cash rate over the past couple of years, they are now above their previous cyclical lows,” he said.

According to Mr Battellino, the increased cost of wholesale funding and strong competition for deposits has pushed up commercial interest rates relative to the official cash rate.

"Taking this into account, it would be reasonable to conclude that the overall stance of monetary policy is now back in the normal range, though in the expansionary segment of that range," he said.

Mr Battellino’s comments came after the Australian Bureau of Statistics (ABS) showed that the Gross Domestic Product (GDP) had enjoyed marginal growth in the September quarter, suggesting the RBA may keep rates on hold when they meet in February.

According to data from the ABS, the GDP increased by 0.2 per last quarter.

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