RBA leaves interest rates unchanged

Tuesday, Jul 07 2015

As it was largely expected RBA left interest rates unchanged. The Board judged that leaving the cash rate unchanged was appropriate at this meeting. Information on economic and financial conditions to be received over the period ahead will inform the Board's assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.

The statement was quite neutral repeating already well-known stanzas on economy and employment. In Australia, the available information suggests that the economy has continued to grow over the past year, but at a rate somewhat below its longer-term average.

The rate of unemployment, though elevated, has been little changed recently. With very slow growth in labour costs, inflation is forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending.

As for exchange rate it was once again noted that the Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices.

This kind if statement did not have any major impact on markets with Aussie currently being traded few points below 0.75 handle. Pair is likely to find support around 0.7460 and resistance above 0.7530 level. Later today, in the US session, Trade Balance and JOLTS Job Openings figures are scheduled for a release.

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