Australian Dollar Holds Near Parity after RBA Rate Decision
The Reserve Bank of Australia maintained its cash rate target at 4.75% for a third month, matching expectations. The Australian Dollar- which was rallying prior to the monetary policy decision- continued higher, holding just below parity versus the U.S. Dollar.
In its accompanying statement, the RBA sounded a surprisingly optimistic tone. Referring to the impact from the flooding in Queensland as having a “temporary adverse effect on economic activity and prices,” the central bank went on to say that it will “look through the estimated effects of these short-term events on activity and prices.”
Overall, the RBA continues to have a very favorable view of the Australian economy. Private investment is picking up and employment growth was “unusually strong in 2010,” according to the central bank. Additionally, “prices for the relevant commodities have risen and are likely to remain elevated in the near term.”
On the other hand, the central bank does not see inflation as a concern. “The Bank expects that inflation over the year ahead will continue to be consistent with the 2–3 per cent target.” All things considered, “the Board judged that the current stance of monetary policy remained appropriate in view of the general macroeconomic outlook.”
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