A Less Dovish Statement from the Reserve Bank of Australia

June 2, 2015

After cutting the RBA’s official cash rate from 4.75% prior to November 2011 to a currently record low of 2.0% with the most recent reductions happening this year in February and at its prior meeting in May, the central bank Board released a statement today keeping the OCR at 2.0% and shifting forward guidance from a continuing bias to ease to a stance whose future direction will hinge on forthcoming data.  The May statement had concluded, “the Board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand.”  Today’s communique ends,

Having eased monetary policy last month, the Board today judged that leaving the cash rate unchanged was appropriate at this meeting. Information on economic and financial conditions to be received over the period ahead will inform the Board’s assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.

Officials characterized current policy as not only “appropriate” but also accommodative.  Nonetheless and in spite of the recent depreciation of the Aussie dollar against the U.S. dollar, officials leave no doubt about their desire for a continuing adjustment of the currency:  “Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices.”  The outlook for inflation supports continuing monetary accommodation:  “the economy is likely to be operating with a degree of spare capacity for some time yet. With very slow growth in labour costs, inflation is forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.”

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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