AUD/USD up to 0.7620 as RBA Remains Steady at 1.5%

Australia’s central bank stood pat on interest rates as it awaits further inflation data and weighs the impact of two cuts in the last four months. In his final meeting, Reserve Bank of Australia Governor Glenn Stevens and his board left the cash rate at 1.5 percent Tuesday, as forecast by all 26 economists surveyed. Traders see little chance of further easing until after the release of third-quarter consumer-prices data late October, as the outgoing chief reiterated that inflation was expected to remain low for “some time.”

Stevens hands the leadership baton to his deputy Philip Lowe in just under two weeks. The new governor inherits an economy underpinned by increased resource exports, a housing construction boom and an uptick in services industries. But anemic wage growth and weak inflation are signaling plenty of spare capacity which, along with the impact from zero or negative rates in Japan and Europe, prompted the central bank to last month take borrowing costs to a new record low.

Tuesday’s statement “covers fairly familiar territory and leaves a reasonably clean slate for Phil,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. “Issues over the traction policy gets as you move lower, trying to fight global flows, the search for yield and the impact on the currency are all bigger picture issues that Phil’s going to have to deal with.”

Bloomberg

Stuart McPhee
Stuart McPhee
Australian private trader for nearly 20 years, author, trading coach, licensed adviser and regular speaker at major trading events all around the world. Graduate of RMC Duntroon and former Australian Army Officer.