As expected, the Reserve Bank of Australia (RBA) left interest rates unchanged at 1.50%. As a result, the Australian dollar rose by almost 0.40% against the dollar.
In the accompanying statement, the RBAS said that the global economy was growing as expected. The economic growth, coupled with the unemployment rates are improving around the world. At the same time, wages are rising, albeit slowly while the rate of productivity is improving. Inflation has fallen in most countries while in some others, it has picked up, accelerated by high energy prices and the tightening Philips Curve.
Also, the statement focused on the ongoing issues about trade. Recently, Trump has moved to reshape the global trade systems. He announced steel and aluminum tariffs and have Australia an exemption. He also announced fresh tariffs on Chinese goods. This week, China responded buy increasing the number of items it will impose tariffs on. The acceleration of a trade war is likely to hurt Australia, which has strong ties to both the United States and China.
On the Australian economy, the statement was still cautious about the housing market where house prices are falling in major cities like Sydney and Melbourne. However, it was positive about the overall health of the Australian economy, with the unemployment rate being at a 5%, inflation being contained, and with the manufacturing industry picking up. According to the statement, the officials were happy that inflation was below 2%, but forecasted that it may improve as the labor market continued to tighten. Overall, their target inflation rate for this year is 2%.
Nonetheless, there were concerns about the low commodity prices, which has affected the amount of exports.
The Australian dollar is currently trading at 0.7686 level. Year to date, it has fallen about 1.42% against the dollar. On the other hand, the dollar index has fallen significantly, caused by the strength of other currencies such as euro and pound.
The RBA might not expected to have more rate hikes this year as it tries to support the economy. The low interest rates have helped the residents afford more goods and services. It has also helped improve the manufacturing and service industries, which have been able to hire more people.