- Reserve Bank of Australia
The Reserve Bank of Australia said recent weakening of the Aussie Dollar is supporting economic growth and helping the economy to adjust from a decade-long period of mining investment toward stronger growth in exports. For the first time in almost two years the central bank said the Australian Dollar was not overvalued, reinforcing the view that further interest rate cuts are unlikely to be needed. In recent months, the local Dollar has fallen to its lowest level in six years. Policy makers are becoming more confident that post-mining boom growth is gaining steam, citing recent stronger data including hiring. The RBA is also relying on the US central bank to hike rates later this year, which could fuel a further drops in a local currency that has already lost 8% in the past three months. The RBA was a little more upbeat on its key trading partner China, suggesting threats to growth in the world's second biggest economy had "receded somewhat". Still, the central bank said Beijing's "policy response to the recent volatility in Chinese equity markets had clouded the medium-term economic outlook."
The RBA has cut interest rates two times this year in response to weakening growth and steep declines in commodity prices. Financial markets have priced in some risk that a further cut will be needed over the next year.
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