The Reserve Bank of Australia left its cash rate unchanged on Tuesday as widely expected but slightly stepped up its language on the elevated level of the Australian dollar by saying the currency remains high given the continued fall in commodity prices.
“The exchange rate remains high by historical standards, particularly given the further decline in commodity prices,” the RBA said in the cash rate statement.
The RBA said commodity prices remain high in historical terms but some of those important to Australia have continued to decline of late. The reference was mainly to iron ore prices which have fallen to the lowest level since mid-2012.
While the currency’s fall from the highs of last year “is assisting in achieving balanced growth in the economy,” the benefit is lessened as a result of the higher level of the exchange rate over the past few months, the RBA said.
This is the ninth consecutive meeting without any rate action from the RBA and the fourth meeting where it has offered the same guidance that “the most prudent course is likely to be a period of stability in interest rates.”
The RBA has trimmed the cash rate by a total of 225 basis points since an easing cycle that began in November 2011, reaching 2.5% in August.