RBA Leaves Interest Rates On Hold, Says Dollar 'Uncomfortably High'

Getty / Cameron Spencer

Australia’s Reserve Bank left the target cash rate on hold at 2.5% after its November meeting today.

In the accompanying statement, the RBA said the Australian dollar remained “uncomfortably high”.

But it also signalled that it sees increasing confidence in the economy and signs that investors are starting to build an appetite for taking on some extra risk. It’s an upbeat assessment of the current state of the economy.

The Australian dollar fell slightly on the news but recovered some of the ground and was at $US0.9488 a short time ago.

Here’s the key excerpt from the statement, emphasis added.

The easing in monetary policy that has already occurred since late 2011 has supported interest-sensitive spending and asset values. The full effects of these decisions are still coming through, and will be for a while yet. The pace of borrowing has remained relatively subdued overall to date, though recently there have been signs of increased demand for finance by households. There is also continuing evidence of a shift in savers’ behaviour in response to declining returns on low-risk assets. Housing and equity markets have strengthened further, trends which should in time be supportive of investment.

The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.

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