Economic Update

The Reserve Bank of Australia (RBA) had markets moving this month, particularly the Australian dollar. It inadvertently did this when it put a number on the “neutral” rate of interest in Australia (the point at which policy is judged from being expansionary to contractionary, or vice-versa) in its June Board meeting minutes. The number itself was of no surprise to economists, but given the demand from markets for hawkish fodder, as other central banks move to remove policy stimulus, this was interpreted somewhat as a statement of intent. It turned out to be a mis-interpretation as the RBA qualified the discussion as being a theoretical one, with no implications for short-term policy settings.