- Glenn Stevens, RBA Governor
The Australian Dollar rebounded from the lowest level in six years after the Reserve Bank of Australia kept interest rates unchanged and was more comfortable with the level of the Aussie, whose 20% depreciation versus the Greenback in the last 12 months has supported exporters as well as import-exposed business. As expected the RBA kept the cash rate steady at 2% for the third month in a row, but left the door open for a further cut this year. RBA Governor Glenn Stevens reiterated that inflation was contained and growth remained sub-trend. Last month Stevens said Australia's potential economic growth is probably now weaker than the 3%-3.25% annual rate the central bank has been estimating, partly due to slower population growth, which is putting less downward pressure on prices and explains the levelling off in the unemployment rate. However, he appeared satisfied with recent stability in the labour market, despite spare productive capacity.
The central bank last cut rates by 25 basis points in May, following a similar reduction in February after 18 months on hold. Despite some uneven economic data since then, the RBA remains reluctant to make a third cut, partly due to concerns about Sydney's overheated property market and household indebtedness. The RBA also doubts the efficiency of lower rates at this stage of the current cycle.
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