Jobs market will determine rate cuts: RBA

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The Reserve Bank of Australia has made clear a softening in the jobs market will force it to cut interest rates

since August 2016, but markets put the chance of a cut at more than 66 per cent because of growing concerns about low inflation and the strength of the jobs market., show RBA members alert to the problems of very low inflation that has so far failed to lift despite ongoing jobs creation.

"Nevertheless, a lower level of interest rates could still be expected to support the economy through a depreciation of the exchange rate and by reducing required interest payments on borrowing, freeing up cash for other expenditure." Globally, there has been a long period of solid jobs growth without a lift in inflation. The minutes show this phenomena was discussed by board members, with many noting this could mean lower rates of unemployment without inflation reaching the RBA's target band of 2-3 per cent.

 

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A hopeless situation developing, which could be financially explosive for stable economy

So they have two aims (lower unemployment and a higher CPI) and one policy instrument (the OCR)? Good luck with that fellas. I'm thinking of the 'Tinbergen Rule' here (you need at least as many instruments as you do targets).

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