Australian dollar rises on soft RBA speech

Financial and commodity markets analytics

The Australian dollar is trading higher today after a softer than expected tone from the RBA in their latest speech, although they left the door open for a rate cut if warranted.

At 1pm (GMT) the Aussie dollar was trading at US71.55c up from US71.29c in yesterday’s trade.

In his latest monetary speech, RBA governor Glenn Stevens noted that although he was happy with the outlook on the economy, and especially the transition away from the mining boom, inflation was still a problem and will be monitored over the coming months.

“Inflation is quite low. With growth in labour costs continuing to be quite subdued as well, and inflation restrained elsewhere in the world, inflation is likely to remain low over the next year or two” Mr Stevens noted.

He also mentioned that the housing market was beginning to slow down which has been a major headache for the RBA as any cut in rates would only further inflame the real estate market.

“The pace of growth in dwelling prices has moderated in Melbourne and Sydney and has remained mostly subdued in other cities. The exchange rate has been adjusting to the evolving economic outlook” Stevens said.

The slow down in the housing market is good news for consumers, but it is also a boon for the RBA, as a booming housing market was one of the reasons they have kept rates on hold.

To round out the speech the governor noted that the door was still open for a rate cut somewhere down the line if inflation fails to pick up,

“Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand “he said.



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