The Reserve Bank governor Glenn Stevens has appeared to be pleased with the current exchange rate of around US72-US73 cents, implying no new rate cuts expected during his tenure.
“At the moment it is doing what we expect it to do given the circumstances we face, ” he told the Trans-Tasman Business Circle boardroom briefing in Sydney on Tuesday.
Stevens added that inflation was currently a “bit too low” but expressed confidence it would return to the two to three per cent range in the medium-term.
“We are delivering what we were talking about and it’s not at all a very rigid thing that demands kneejerk responses. It’s got adequate flexibility to look at the broad picture,” he said.
Stevens pointed to the success of the current 2-3% inflation target since it was introduced in the early 1990s in keeping price rises under control during a period where Australia has recorded a quarter of a century without a recession.
"We shouldn't give up and throw away a framework that has been successful," he said.
Stevens finishes in the role in September, and his current deputy Philip Lowe was recently appointed by the Federal Government to succeed him.
"Quite some years ahead of hard work ahead for whoever is governor," Stevens said in his speech.
The RBA cited low, broad-based inflation as the trigger behind reducing the cash rate to a fresh low of 1.75 percent on May 3, its first cut in a year.
The overall tone of the RBA minutes made public on May 17 also suggest another rate cut is very unlikely this year. A recent surge in housing markets of the capital cities is also likely to put RBA on hold.
According to the minutes, some members wanted to ignore lower than expected inflation and keep the key interest rate on hold at the May 3 meeting because low inflation could be attributed to seasonal factors.
