Strong AUD may force interest rate cut
(23 June 2016 – Australia) Although Australia’s central bank has not given formal indications of movement in interest rates, it may be forced to further cut the overnight cash rate due to the strength in the Australian dollar.
The Reserve Bank of Australia (RBA) held the interest rate at 1.75 percent earlier this month, following a drop in the Australian dollar, an increase in exports from the resource sector, and a 0.2 percent fall in inflation figures.
However, the release of the latest board meeting minutes only mentioned that inflation was expected to stay low for a short time.
An appreciating AUD was also a concern to the RBA’s board. The minutes highlighted that a rise could curtail recent economic growth, driven by exports, raising the possibility that the currency could become another rate trigger.
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