Reserve Bank of Australia Hints at End of Year Recovery, Minutes Show

In its Feb. 3^rd meeting, the board of the Reserve Bank of Australia slashed the overnight cash rate by 100 basis points to the lowest in 45 years, to 3.25%. With the help of fiscal stimulus monetary policy has been able to provide much of the necessary liquidity required to jumpstart the economy. Indeed, the minutes of the most recent RBA meeting expressed optimism over the medium-term outlook for the Australian economy. Liquidity easing, combined with the government’s fiscal stimulus, will probably “help to cushion the economy from the contractionary forces coming from abroad,” the minutes said. The effort of both the Treasury and the Reserve will “work to establish conditions conducive to stronger demand later in the year.”


Source: Bloomberg, Prepared by Luis Gil

A positive short-term outlook is less likely as the stimulus “would take time to be effective and could be expected to have only a modest effect on the near-term outlook.”

The Australian currency has fallen as much as 39% against the U.S. Dollar since it reached its high on Jul. 15 of 0.9850. From its low on Oct. 27^th, the Australian Dollar has rebounded by 7.25% against the greenback.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.