Reserve Bank of Australia

September 1, 2015

This month’s central bank Board meeting and statement again judged Australia’s record low 2.0% Official Cash Rate to be appropriately accommodative.  Cuts of 25 basis points were decided in February and May of this year.  Earlier reductions in May 2012, June 2012, October 2012, December 2012, May 2013 and August 2013 were also 25 basis points in sized except for the May 2012 change, which amounted to 50 bps.  The statement predicts, “the economy is likely to be operating with a degree of spare capacity for some time yet, with domestic inflationary pressures contained. Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.”  Regarding the currency, modified language from the July statement was again used that backs off the emphatic previous call for more depreciation but acknowledges that the weakening makes sense in line of the sharp decline in export commodity prices:  “The Australian dollar is adjusting to the significant declines in key commodity prices.”

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



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