Aussie dollar surging as RBA keeps rates on hold for August

The RBA has kept rates on hold for another month despite the central bank weighing the economic effects of sluggish growth, weak inflation and a resurgent Australian dollar.

The unchanged rate was no surprise given governor Philip Lowe said last week the RBA was set to leave rates as they were for the short term at least.

In his statement, Dr Lowe said he was indeed concerned about the effects of the Australian dollar, which is on the rise again.

“The higher exchange rate is expected to contribute to subdued price pressures (inflation) in the economy,” he said.

“An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.”

The Aussie dollar has surged back up past the US80c mark and Dr Lowe said the RBA was also concerned about the health of the retail and property sectors.

“One source of uncertainty for the domestic economy is the outlook for consumption,” he said.

“Growth in housing debt has been outpacing the slow growth in household incomes.”


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