The Reserve Bank of Australia left its main policy rate steady at 3.0% for the fourth time. In the statement accompanying the interest rate decision, Governor Glenn Stevens implied that the interest rate perspective would no longer be biased toward the downside. He stated that the "present accommodative setting of monetary policy is appropriate given the economy's circumstances." The remarks here deviate significantly from that which appeared on the statement accompanying the previous meeting. In it, the RBA led the public to believe that it could commit to an increasingly dovish policy stance. That is "the Board's current view is that the outlook for inflation allows some scope for further easing of monetary policy, if needed" the previous statement said.
Stevens, also remarked that "economic conditions in Australia have to date not been as weak as expected a few months ago." Still, "output has been sluggish" and "weaker demand for labour is leading to lower growth in labour costs," he added. This statement is quite correct. June's Retail Sales figure, released earlier today, stunned economist forecasts. Spending on such goods plummeted 1.4% while expectations had called for the figure to actually rise 0.5%. But the RBA's decision could be based on preliminary data covering July's consumer habits. Nonetheless, official figures show that the economy is far from a recovery.
Interestingly enough, the RBA may have contradicted that which Prime Minister Kevin Rudd expressed in the previous week. The statement implied that Chinese growth has been aiding the country when it said "Growth in China, in contrast has been very strong in recent months, which is having an impact on other economies in the region and on commodity markets." But Rudd on the other hand expressed that the country can no longer rely on a "mining boom" to bolster its stature.
Reactions from global forex traders were mixed. After initially spiking 34 pips, speculators shorted the Australian Dollar against its American counterpart.
