Australian Cash Rate Held Steady

July 7, 2009

As in May and June, the Reserve Bank decided to keep its target cash rate unchanged at 3.0%.  In six moves, such had been reduced 4.25% starting with a 25-bp drop last September and including reductions of 100 bps each in October, December and February, 75 bps in December, and 25 basis points in April.  A statement from Governor Stevens observes diminishing downside growth risks in the world and Australia but also sub-normal capacity usage and lessening labor cost pressures that point to falling inflation.  Although significant monetary easing has occurred and market interest rates are low historically, the benign inflation picture would allow monetary officials to ease policy further if that were to become necessary.  The statement makes no mention of the Australian dollar, which in line with commodity price softness gave back 1.8% against the dollar since the June policy meeting but remains 10% above its May trough.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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