RBA’s interest rate settings get lower and lower

If, as many economists suggest, the Reserve Bank starts to move the cash rate back from its historic low of 2.5 per cent to a neutral setting later this year, the "neutral setting" may be lower than in the past.

Commonwealth Bank economist Gareth Aird says the neutral cash rate is now 3.5 per cent. In February 2012, RBA governor Glenn Stevens said that 4.25 per cent was "broadly neutral".

Back in 2004 the RBA nominated a range of 5.25 per cent to 6.25 per cent as a "zone of neutrality".

Source: Banking Day

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