Reserve Bank of Australia: No Change

April 1, 2014

Australia’s Official Cash Rate had previously undergone nine reductions of 25 basis points between November and August to a decades-low level of 2.5%, which although “accommodative” also happens to be “appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates,” according to the RBA Board’s latest statement.  Inflation has been constrained by slower growth in wages, which if continued will produce “some moderation in the growth of prices for non-traded goods over time.”  The statement predicts in-target inflation over the next two years and hopes to support demand with its policy stance.  Economic growth last year was below trend, and a significant drop in resource sector investment spending is predicted.  On the Aussie dollar, the statement reiterates that “the exchange rate remains high by historical standards” and argues that in-target inflation will be maintained even with lower A-dollar levels.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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