Reserve Bank of Australia

December 3, 2013

This month’s Board meeting ended with another decision to leave Australia’s official cash rate at 2.5%.  Such fell to that level after eight cuts engineered between November 2011 and August 2013.  All of those reductions but a 50-bp cut in May 2012 were moves of 25 basis points in size. 

The Board’s statement after today’s meeting read almost word-for-word as the prior dovish statement released in November.  The Board meets every month except in January, so today’s decision covers policy for the coming two months.  Highlights underscored in the statement include

  • Reaffirmation that “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.”
  • Forecast of continuing sub-trend growth in the near term and in-target inflation over the next 1-2 years..
  • Private domestic demand has improved, but the outlook is still fraught with uncertainty.
  • The belief that current policy settings are “appropriate,” partly because the stimulus from the series of prior cuts is still not fully felt.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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