RBA Opts to Keep Monetary Policy Unchanged

Points to consider in this RBA article:

• The Australian Dollar moves lower against its  major G-10 counterparts.
• The Reserve Bank of Australia (RBA) keeps its monetary policy and rate unchanged at 1.75 percent. No surprise.
• The bank sticks to data to define growth and policy adjustment approach.

The Australian Dollar first moved higher then reversed a bit lower after the Reserve Bank of Australia kept its interest rate at 1.75 percent and left monetary policy unchanged. This was in line with what economists expected.

With this decision falling into the realm of the expected, attention turned to the RBA press release and comments from bank Governor Glenn Stevens.

The statement said that the RBA feels that the financial markets have been quite volatile thanks to the Brexit. However, they feel most markets are “behaving effectively.” The interesting point here is that the RBA feels that any effects from the UK decision to leave the EU and the outcome on the global economy remains to be seen. However, the effect on the British economy is tough to predict or comprehend right now.

RBA Remains Concerned about Inflation

The central bank remains concerned with the low inflation as well as the “subdued” costs of labor. There are low global costs and the bank expects this to remain unchanged for the foreseeable future.

In the closing remarks of the bank statement, policy makers changed from earlier language that further information could help refine their outlook on economic growth and inflation. This would lead to changes in monetary policy. The last statement read that the holding policy was not changed and “consistent with sustainable growth” as well as inflation returning to the target set over a period of time.

This is where we got the most reaction in the global financial markets and the current see-sawing with the Australian Dollar.