The RBA has left interest rates on hold for the 11th straight month but another rate cut could be on the cards if the Australian dollar continues its stubborn resistance.
The official cash rate is still on the record-low 2 per cent and most economists had it pegged to stay that way for the month of April.
RBA governor Glenn Stevens posted a warning that if the Australian dollar does keep rising it may have to move on interest rates.
“The Australian dollar has appreciated somewhat recently. In part, this reflects some increase in commodity prices, but monetary developments elsewhere in the world have also played a role,” he wrote in his post-meeting statement.
“Under present circumstances, an appreciating exchange rate could complicate the adjustment under way in the economy.”
After dipping below the US70c mark in recent times, the Australian dollar has rebounded to sit at around US76c currently.
Aside from the Australian dollar, the RBA is also keeping a close eye on the continuing low inflation rate as the other big factor putting pressure on them to cut rates again.
“New information should allow the board to assess the outlook for inflation and whether the improvement in labour market conditions evident last year is continuing,” Mr Stevens said.
“Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand.”
CommSec chief economist Craig James told The Sydney Morning Herald that if the RBA did cut rates it would be because of deteriorating global economic conditions or because of continued strength from the Australian dollar and thinks they’ll stay put for the foreseeable future.
“The Reserve Bank governor said there was the risk that the Aussie dollar was getting ahead of itself. But no doubt the Reserve Bank believes that this is a temporary phenomenon,” Mr James said.
