The Australian dollar strengthened after the announcement from the Reserve Bank of Australia that it kept interest rates unchanged. Most economists were expecting the RBA to hold rates at a record low 2 per cent.
Despite data from last week that inflation for the third quarter cooled to just 2.1 per cent the central bank held fire at this meeting but strongly hinted that further rate cuts are possible in the coming months.
The RBA policy makers looked past the soft inflation numbers. Although growth and inflation remain sluggish, the bank appeared happy with the lower Australian dollar’s assistance to non-mining segments of the economy.
The RBA last cut rates in May, taking the benchmark interest rate to a historic low of 2 per cent. It also trimmed rates in February. The target inflation rate is between 2-3 per cent.
The RBA took low price pressures into account and said it “may afford scope for further easing of policy, should that be appropriate to lend support to demand.”
The Australian dollar was up 0.3 per cent just before the decision and was relatively unmoved afterwards, at $0.7170.
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