RBA Keeps Rate Unchanged, Again Refers To AUD As Uncomfortably High The Reserve Bank of Australia left the cash rate unchanged as widely expected and described the Australian dollar as uncomfortably high despite its fall in the past month while pledging it will continue to assess outlook and adjust policy as needed. At the board meeting Tuesday, the RBA kept the cash rate on hold at a record low 2.5%. All 20 economists in the poll predicted the outcome. The RBA has trimmed the cash rate by a total of 225 basis points since an easing cycle that began in November 2011, reaching 2.5% in August. Once again, the RBA didnt provide any explicit rate bias in the statement, but the tone of the statement remained the same - that there remains a mild easing bias, given the continued reference to the exchange rate as high. The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy, Governor Glenn Stevens said in the statement announcing the rate decision. The Australian dollar had fallen nearly 4.0 cents in the past month, trading close to $0.9100 from around $0.9481 a month ago. The statement was identical to the previous one in November barring just one difference. Last month, the RBA said it is still too soon to judge how persistent recent improvement in indicators of household and business sentiment will be. In the statement today, Stevens said, There has been an improvement in indicators of household and business sentiment recently, but it is still unclear how persistent this will be. The RBA reiterated easing in monetary policy to date has supported interest-sensitive spending and asset values and the full effects of these decisions are still coming through, and will be a while yet. Housing and equity markets have strengthened further and these trends should in time be supportive of investment, the RBA said. The economy will continue to grow below trend in the near term, but further ahead private demand outside the mining sector is expected to increase at a faster pace but there remains uncertainty around this outlook, the RBA said. Public spending is forecast to be quite weak, it added. The RBA reiterated it expects inflation to remain consistent with the medium-term trend over the next one or two years. On the global economy, the RBA repeated growth is running a bit below average this year with reasonable prospects of a pick-up next year, and that inflation in most countries remains well contained. It said volatility in financial markets had abated recently, but long-term interest rates remain very low and there is ample funding available for creditworthy borrowers.
Posted on: Tue, 03 Dec 2013 04:45:16 +0000
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