Australia: RBA keeps rates unchanged in November
November 5, 2013
The Reserve Bank of Australia (RBA) left the cash rate unchanged at the historic low of 2.50% at its 5 November meeting, a decision broadly expected by the market.
The RBA decided to keep the rate at its previous level given that the monetary policy stance is consistent with the current economic situation. The monetary authority cited the global economic outlook, claiming that growth is below average and is only expected to pick up next year. Moreover, inflation remains subdued in most countries, thus minimizing the risk of imported price increases. The domestic economy - the RBA argued - is showing similar signs; Australian GDP is performing below average and unemployment is still high, mainly due to the decline in mining investments. In addition, domestic prices remain within the RBA's medium-term target of 2.0%-3.0%, a situation that is, "likely to remain the case over the next one to two years."
Although the RBA remains unconcerned about the evolution of inflation, it stated that the Australian Dollar (AUD), "while below its level earlier in the year, is still uncomfortably high." Consistent with its position in October, the RBA claimed that the economy's below-average performance is not helping the AUD reach a more competitive exchange rate in global markets. Indeed, the RBA stated that a balanced recovery for the Australian economy would have to be based, to a significant extent, on a lower AUD. The AUD closed October at 0.95 USD (September: 0.93 USD per AUD). Panelists polled by FocusEconomics expect the exchange rate to end 2013 at 0.91 USD per AUD. For 2014, the panel sees the exchange rate closing the year at 0.88 USD per AUD.
FocusEconomics Consensus Forecast panelists expect the cash rate to end 2013 at 2.46%, which is up 0.01 percentage points from last month's estimate, and to rise to 2.60% by the end of 2014, which is down 0.01 percentage points from last month's projection.