RBA policy decision: Interest rate unchanged at 1.5%, higher AUD would slow economy

In today's Reserve Bank of Australia's monetary policy decision, as widely expected, the Central Bank decided to keep its interest rate unchanged at 1.5%, with the policy statement being interpreted as neutral. 

Statement by Glenn Stevens, Governor: Monetary Policy Decision

Forecast for Australian economy largely unchanged.

Judged steady policy consistent with growth, inflation targets.

Expects economy to grow at an annual 3 pct rate over the next few years.

Higher AUD is restraining price pressures.

Increased infrastructure investment supporting the economy.

Rising AUD would slow economy.

China high debt level remains medium-term risk.

Further signs Sydney housing conditions easing.

Inflation to pick up gradually as economy strengthens.

Unemployment expected to decline gradually.

Global economy continuing to improve.

Inflation remains low, likely to stay so for some time.

Labour market has continued to strengthen.

Australia's terms of trade expected to decline over the period ahead.

Forecast remains for inflation to pick up gradually.

Key notes

AUD/USD - risk reversals flat lined, yield differential hovers near 4-month low.

AUD/USD risk reversals show lack of bias in the options market. 10Y AU-US yield spread/differential shows signs of life, but still hovers near 4-month low.

When is the RBA and how could it affect AUD/USD?

The market is looking for the RBA's take on the recent retail sales and inflation data in particular that has disappointed...

RBA policy statement 

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.