Australian Monetary Policy Left as Is

September 4, 2012

The Reserve Bank of Australia Board decided to retain a 3.5% Official Cash Rate level after meeting earlier today.  This was the third such monthly decision in a row.  In 2009-10, the OCR was hiked seven times from 3.0% to 4.75%, but four cuts since last November including one of 50 basis points this past May reduced the rate to its present level by this past June.  A statement from the Board made a number of points.

  • “With inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate.”
  • “Bank’s assessment is that inflation will be consistent with the target over the next one to two years. Maintaining low inflation will, however, require growth in domestic costs to remain contained as the effects of the earlier exchange rate appreciation wane.”
  • Growth is being led by capital spending in the resource sector.
  • “Some commodity prices of importance to Australia have fallen sharply in recent weeks.”
  • The exchange rate has declined over the past month or two, though it has remained higher than might have been expected.”

October’s policy meeting of the RBA Board is scheduled for the 2nd.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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