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Australian rate cut working to support demand 'as usual': central bank

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Two back-to-back interest rate cuts in Australia to all-time lows was expected to provide some additional support to the country's economy going forward, a senior central bank official said on Tuesday.

[SYDNEY] Two back-to-back interest rate cuts in Australia to all-time lows were expected to provide some additional support to the country's economy going forward, a senior central bank official said on Tuesday.

The Reserve Bank of Australia (RBA) reduced its benchmark cash rate to 1 per cent in July and has since pledged to keep it low for longer, sending yields across the bond curve to depths not seen before.

Attempting to allay concerns about the effectiveness of monetary policy as interest rates approach zero RBA's assistant governor Christopher Kent said the policy transmission was "working in the usual way".

Mr Kent, speaking in Sydney on the topic "The Usual Transmission - Monetary Policy And Financial Conditions", said the easier stance of monetary policy has led to a decline in the cost of funding in corporate bond markets and for banks while supporting equity prices.

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In addition, "the decline in interest rates in Australia has contributed to the depreciation of the Australian dollar", Mr Kent noted.

The Australian dollar was last trading at US$0.6751, having dived to a decade low of US$0.66775 just last week.

"That broad-based easing in financial conditions in Australia will provide some additional support to demand in the period ahead", Mr Kent added.

REUTERS