Reserve Bank of Australia

December 2, 2014

The 2.5% official cash rate since August 2013 was retained, and the preference for a period of interest rate stability for a period of time with a stance that is appropriately accommodative was reaffirmed in a released statement from Governor Glenn Stevens.  Sub-trend growth and in-target inflation are projected.  The statement observes a further increase in mortgage lending and house prices but also subdued labor market conditions and a significant drop-off in resource-sector investment.  The need for a weaker exchange rate is more closely tied to the goal of more balanced economic growth.

The Australian dollar remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices in recent months. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.

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

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