The Reserve Bank of Australia (RBA) has decided to keep interest rates on hold, despite an expectation earlier that it would announce a cut. The central bank says it is appropriate to hold interest rates steady “for the time being”. Just like the use by the US Federal Reserve of the word “patience”, the “for the time being” expression is interpreted by commentators in Australia as indicating that the decision to hold is a tactical one and that a rate cut if only a matter of when, not if.
Australian authorities are more concerned about a housing bubble than they are about any adverse effects the unchanged interest rate might have on business, for now at least. They are keeping a good eye on the old reliables of inflation, unemployment and GDP figures. So far these are finely balanced and mean that, according to the governor, Glenn Stevens, the case for a rate cut at this time is “not compelling”.
The Aussie dollar reacted accordingly, moving upward on the release of the statement, as seen on the chart above.
More Aussie miners in trouble over Iron Ore price
The RBA has apparently decided to effectively ignore what is happening in the mining sector, where market share tactics by the largest players, who are ramping up production of Iron Ore even in the face of a collapsing price for the commodity, are now beginning to have concrete effects on the smaller players. Last week we reported that the CEO of one miner, Fortescue, felt motivated to call for a cap on production to attempt to place floor under the price, which was roundly rejected by his competitors. Now another mid-tier operator, Atlas Iron, has had its shares suspended while it examines what might be done to deal with the situation it has found itself in. The saga continues.