AS YOU WERE: RBA Leaves Rates On Hold, Indicates Aussie Dollar Should Be Lower

Reserve Bank Governor Glenn Stevens.

Nothing to see here, move along please!

The RBA just delivered a somewhat short clear and crisp update on their view of the economy after this morning’s Board meeting.

Governor Stevens noted recent financial market volatility but stressed that overall financial conditions remain accommodative around the world.

Closer to home he said that “most data are consistent with moderate growth in the economy,” and noted that the economic transition is occurring with “other areas of private demand…seeing expansion.”

His view is wage growth will be low which will contain inflation but I’d add that it is also likely to be a headwind to anything other than modest growth at the moment.

He noted competition had driven rates lower recently, monetary policy remains accomodative and the Aussie dollar was lower on the back of the stronger US dollar.

It was here – and largely only here – where his statement took and edge with the Governor noting that:

The Australian dollar remains above most estimates of its fundamental value, particularly given the further declines in key commodity prices in recent months. It is offering less assistance than would normally be expected in achieving balanced growth in the economy.

In the end though the RBA Board has kept rates on hold at 2.5% and signalled that “the most prudent course is likely to be a period of stability in interest rates.”

Now, time for an adult beverage and a punt on the Cup.

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