Ben S. Bernanke’s decision to begin withdrawing unprecedented policy stimulus is gifting Australian counterpart Glenn Stevens the looser conditions he wants without lowering interest rates at a time of accelerating inflation.
The Aussie has slumped 7.3 percent in the past three months, the most among Group of 10 currencies. A 10 percent drop boosts gross domestic product by 0.5 percentage point to 1 percentage point over two years, the Reserve Bank of Australia estimates. All 32 economists surveyed by Bloomberg expect the RBA to keep the cash rate unchanged at 2.5 percent tomorrow.
Stevens is seeking to balance slowing growth and rising unemployment as a once-in-a-century mining investment boom wanes against surging Sydney house prices. Having cut rates by 2.25 percentage points since late 2011 to a record, in recent months he’s switched to talking the currency down, an effort boosted by the Federal Reserve’s decision to begin tapering bond purchases.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.