Price growth remains well below the Bank of England’s 2% inflation target, however, even though the 0.5% inflation rate beat forecasts for 0.4% growth.
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Immediately following Brexit, on July 5, Bank of England (BoE) governor Mark Carney, cut the countercyclical capital rate to zero, claiming it has “more immediate power” than the BoE’s quantitative easing programme.
The RBA said it was closely watching economic data on inflation, home prices and employment.
The RBA said it thought the decision by the United Kingdom to leave the European Union would have only a limited impact on the global economy and a very small impact on Australia.
The meeting minutes showed that Glenn Stevens and his colleagues are waiting for upcoming inflation figures and will use them to “to make any adjustment to the stance of policy that may be appropriate”.
“Most central banks that have eased monetary policy in the past have seen their currencies continue to strengthen”, he said. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 5 basis points to 1.950 percent and the yield on short-term 2-year note also dipped almost 5 basis points to 1.592 percent by 05:30 GMT.
The bank said data suggested the economy had slowed a little in the second quarter, after reaching a surprisingly brisk annual pace of 3.1 percent in the first quarter.
The RBA held the cash rate steady at the all-time low of 1.75 per cent at the July meeting.
The Reserve Bank may give some further clues to the fate of interest rates when the minutes of the July 5 board meeting are released on Tuesday.
Benign price pressures are widely tipped to push the central bank to slash the cash rate to a new record low of 1.5 per cent in August.
The market expects interest rates to remain unchanged at 7 percent, but another 25 basis points may be added in November.
This does not seem to be a reference to its current level, which the RBA said was about where it had been expected to be in May.
“We also don’t believe that food inflation will breach 14% year on year, but in all likelihood return to trend rates early next year”, Stofberg said.
The Bank is expected to leave rates unchanged due to a slightly firmer rand, somewhat stable inflation, a weak economy, and prospects for lower or constant interest rates globally.
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AUD/USD trades at 0.7517 after sliding from almost 0.76 all the way to 0.75.The slide in the Aussie came hand in hand with a general strengthening of the US dollar and the Japanese yen, a “risk off” mood.
