Australia's central bank left its benchmark cash rate steady at 2.00 percent, as widely expected, repeating its recent guidance that fresh economic data will guide its outlook and determine whether the current policy stance "will most effectively foster sustainable growth and inflation consistent with the target."
The Reserve Bank of Australia (RBA), which has cut its rate by a total of 50 basis points this year, also repeated its comment from its previous board meeting that the "Australian dollar is adjusting to the significant declines in key commodity prices," omitting any reference for the need of further depreciation of the exchange rate.
The Australian dollar, known as the Aussie, started depreciating in September 2014 and has now fallen to levels not seen since April 2009. In response to the RBA's latest statement, the Aussie firmed slightly to 1.399 to the U.S. dollar from around 1.40, but is still down 12.8 percent this year.
In his statement, RBA Governor Glenn Stevens acknowledged the "further softening in conditions in China and east Asia of late," but added that growth the United States was stronger and contrasted the recent volatility in equity markets from developments in China with relative stability in other financial markets.
However, Stevens also said key commodity prices were "much lower than a year ago," resulting in falling terms of trade for Australia.
Australia's economy is continuing to expand moderately, Steven said, with spare capacity likely to continue for "some time yet," and inflationary pressures are contained so inflation will remain consistent with the RBA's target for the next one to two years, even with a lower exchange rate.
Australia's inflation rate rose slightly to 1.50 percent in the second quarter of the year from 1.3 percent in the first quarter, still well below the RBA's target of 2 to 3 percent.
"In such circumstances, monetary policy needs to be accommodative," Stevens said, adding that house prices in Sydney continue to rise strongly and the central bank was working with other regulators to contain any risks that may arise from the housing market.
The Reserve Bank of Australia issued the following statement: