Reserve Bank of Australia Leaves Cash Rate at 2 Percent

The Reserve Bank Of AustraliaPedestrians walk past the Reserve Bank of Australia headquarters in Sydney, Australia. Photographer: Sergio Dionisio/Bloomberg

Reserve Bank of Australia Governor, Glenn Stevens and his board left cash rate at 2 percent on Tuesday, citing weaker economic growth and the needs to make available cheaper loans to encourage investments.

Though, cheap borrowing costs have not really worked except in the property market, a situation, the governor described as “crazy”. Report has it that investors are expecting another 30 percent rate cut by November because of continuous fall in the prices of key exports.

Australia’s medium-term potential growth is expected to be around 2.5 percent compared with 3.25 percent recorded in the past. So far, poor exports continue to hurt manufacturing as it can be seen by the data released early today, where trade balance deficit rose from 2.79 billion to 3.10 billion, exceeding analysts expectation of 2.48 billion.

Also, the local dollar has been struggling for months, and recorded the biggest drop among major currencies last quarter, lost 9 percent between June-September.

However, bank officials including the governor seem to be relatively content with the current level of the Australian dollar and reiterated the apex bank is keeping a close eye on the US Federal Reserve interest rate decision.

Australian dollar rose to 0.71332 from 0.70701 immediately the report was made available to press, officials are confident the long-awaited rate increase would help eliminate upward pressure on Australian dollar.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

Be the first to comment on "Reserve Bank of Australia Leaves Cash Rate at 2 Percent"

Leave a comment

Your email address will not be published.