Talking Points
- RBA Leaves Key Rate Unchanged at 2 percent as Expected
- Australian Dollar Pushed Higher, Climbing 0.7% vs. USD
- Policy Statement Maintains Neutral, Data-Dependent Tone
The Australian dollar climbed as much as 0.7 percent versus its US namesake after the Reserve Bank left rates unchanged in June. Although markets were expecting no rate cut, there was speculation building that the central bank would turn more dovish in the near term. Australian economic news flow has been deteriorating relative to expectations since the beginning of April.
Despite this, the RBA maintained a rather neutral stance on its monetary policy. In its statement, the bank saw improvements in household spending and a rise in exports. Public spending is expected to be subdued and the overall economy is likely to be operating with a degree of spare capacity for some time yet. In these circumstances, the Reserve Bank said monetary policy will need to be accommmodative. While this hints that further rate cuts may be ahead, policymakers stressed that any such decision will be dependent on incoming data, offering no distinct bias for the near term.
