Reserve Bank of Australia Policy Review
The RBA Board, unlike at two meetings earlier this year in February and May, did not cut its record low 2.0% further this time but nonetheless released a statement that makes a case for continuing monetary accommodation. Aside from a falling terms of trade (export/import ratio), “the economy is likely to be operating with a degree of spare capacity for some time yet. Recent information confirms that domestic inflationary pressures have been contained. That should remain the case for some time, given the very slow growth in labor costs. Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.” What the statement went on to say about the Aussie dollar -– or rather didn’t say – created the greatest market impact, including a nearly 2% rise of the A$ against its U.S. counterpart. The statement merely says, “the Australian dollar is adjusting to the significant declines in key commodity prices” but, in contrast to earlier statements, did not also assert that additional depreciation is necessary and likely given the significant fall in commodity prices on Australian exports. The two aforementioned interest rate cuts earlier this year were the first changes since a 25-basis point cut in August 2013 that culminated two percentage points of rate decreases that was begun in May 2012.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
This entry was posted on Tuesday, August 4th, 2015 at 10:35 am and is filed under Central Bank Watch. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
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