SYDNEY, Oct 30 (Reuters) - One of Australia's top central bankers said on Thursday the country's high level of inflation could limit room for manoeuvre on interest rates, just a week before its monthly policy meeting was expected to sanction a rate cut.
In an generally optimistic speech on household finances, Reserve Bank of Australia (RBA) Deputy Governor Ric Battellino also said the central bank was aiming to avoid a recession in Australia and there was nothing in the data to date to suggest it was off track.
'The Bank has for some time thought that inflation would peak in the second half of 2008 and then fall; accordingly, we have acted pre-emptively in reducing interest rates,' said Battellino.
'Nonetheless, there is still a big task ahead to bring inflation down and this could limit room for manoeuvre on monetary policy,' he added.
The RBA slashed rates by 100 basis points to 6.0 percent earlier this month, the biggest cut in 16 years, as it sought to cushion the economy from a global slowdown.
Investors have also been assuming it would cut the cash rate by at least 50 basis points at its monthly policy meeting next Tuesday, and take rates to 5 percent by Christmas.
Battellino acknowledged that economic growth in Australia would likely be noticeably more subdued in the next two years or so, but said this was a necessary breathing space following above average growth in preceding years.
Battellino was upbeat on household finances, noting incomes in the past five years had been the strongest in the developed world. And he argued that house prices in Australia would not fall nearly as far as they have in the United States, in part because there was no excess of unsold, empty homes.
(Reporting by Wayne Cole; Editing by Jonathan Standing) . ng COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
In an generally optimistic speech on household finances, Reserve Bank of Australia (RBA) Deputy Governor Ric Battellino also said the central bank was aiming to avoid a recession in Australia and there was nothing in the data to date to suggest it was off track.
'The Bank has for some time thought that inflation would peak in the second half of 2008 and then fall; accordingly, we have acted pre-emptively in reducing interest rates,' said Battellino.
'Nonetheless, there is still a big task ahead to bring inflation down and this could limit room for manoeuvre on monetary policy,' he added.
The RBA slashed rates by 100 basis points to 6.0 percent earlier this month, the biggest cut in 16 years, as it sought to cushion the economy from a global slowdown.
Investors have also been assuming it would cut the cash rate by at least 50 basis points at its monthly policy meeting next Tuesday, and take rates to 5 percent by Christmas.
Battellino acknowledged that economic growth in Australia would likely be noticeably more subdued in the next two years or so, but said this was a necessary breathing space following above average growth in preceding years.
Battellino was upbeat on household finances, noting incomes in the past five years had been the strongest in the developed world. And he argued that house prices in Australia would not fall nearly as far as they have in the United States, in part because there was no excess of unsold, empty homes.
(Reporting by Wayne Cole; Editing by Jonathan Standing) . ng COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.