Australian Official Cash Rate Held Steady at Record Low of 2.0%

February 2, 2016

The Reserve Bank of Australia released a statement today after its first Board meeting of 2016.  It observes that “the exchange rate has continued its adjustment to the evolving economic outlook” and makes the following other points:

  1. Recent Australian economic growth has remained positive but not quite as good as was expected.
  2. A four-year-long deterioration of Australia’s terms of trade (export/import price ratio) is still continuing.
  3. Growth in Australia’s main foreign market, China, continues to moderate.
  4. Heightened world financial market volatility flared up again recently.
  5. Australian inflation is below target, not only due to falling commodities but also reflecting very subdued core inflation.
  6. “Over the period ahead, new information should allow the Board to judge whether the recent improvement in labour market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand.”
  7. Continued low inflation may provide scope for easier policy, should that be appropriate to lend support to demand.”

From a high of 4.75% prior to late 2011, nine official cash rate (OCR) cuts of 25 basis points beginning in November of that year and one of 50 basis points in May 2012 reduced the OCR to 2.0% in May 2015.  There have been no subsequent rate changes.  The Board meets monthly except in January when no meeting is traditionally held.  The Aussie dollar is somewhat over 11% weaker than its U.S. counterpart than it was a year ago.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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