RBA keeps OCR unchanged; trade deficit balloons in February

Source: Dukascopy Bank SA
"Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand"
-  Reserve Bank of Australia

The Reserve Bank of Australia kept the official cash rate at a record low 2% for a 10th consecutive meeting, but warned that the recent strong rise in the Australian Dollar could "complicate" the economy's transition. Australia's Trade-Weighted Index recently hit the highest level in nine months, with the Aussie Dollar also reaching a June-2015 high versus the US counterpart in March. However, RBA Governor Glenn Stevens said low inflation would facilitate another rate cut if that were necessary. In the final quarter of 2015 Australia's consumer inflation climbed an annualized 1.7%, the sixth straight quarter that headline inflation was below the RBA's 2-3% target range. March-quarter inflation data are due on April 27. Bets on future rate cuts declined slightly, with markets pricing in a 29% possibility of a cut at the May meeting, moving up to a 58% chance in July.

A report of the Australian Bureau of Statistics showed Australia posted a wider-than-expected trade deficit in February. The national trade deficit surged to $3.41 billion in February after seasonal adjustments, above the upwardly-revised $3.156 billion shortfall in January and expectations for a drop to $2.5 billion. Exports fell 1.0% in February, while imports remained unchanged. Falling commodity prices, a rising Australian Dollar, and weakness in China's demand are putting pressure on Australia's trade accounts.


© Dukascopy Bank SA

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