Fed: Next move on rates more likely upwards: Macfarlane =2

AAP General News (Australia)
02-17-2006
Fed: Next move on rates more likely upwards: Macfarlane =2

Meanwhile, Mr Macfarlane said current official interest rates were neutral in their
impact on the overall economy.

He said the current official rate of 5.50 per cent was also having a neutral impact on inflation.

"At the current level of 5.5 per cent the cash rate is in line with its average over
the low inflation period since 1993," he said.

"There is, therefore, a sense that the current level is relatively neutral in terms
of its impact on economic activity and inflation."

Mr Macfarlane said a complicating issue was that interest rates on offer to borrowers
were actually below average.

"One complication in assessing the level of interest rates however is that competition
in the financial sector has seen margins between the cash rate and institutions' lending
rates narrow over recent years," he said.

"The interest rate faced by borrowers are still a little bit below average."

AAP sw/apm/sp

KEYWORD: RBA INTEREST 2 CANBERRA (REOPENS)

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