Cash rate now within wide, uncertain neutral range
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Reserve Bank of Australia (RBA) Assistant Governor (Financial Markets) Christopher Kent spoke at the CFA Society Australia Investment Conference 2025 late Wednesday. Key quotes Financial conditions less restrictive after recent rate cuts. Cash rate now within wide, uncertain neutral range. Neutral rate not a reliable guide for near-term policy. Economic forecasts show tightness easing, but outlook uncertain. RBA to reassess outlook with incoming data and risks. Market reaction At the time of writing, AUD/USD is down 0.17% on the day at 0.6495, courtesy of the weak Australian employment report for September. RBA FAQs The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening. While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar. Macroeconomic data gauges the health of…
Filed under: News - @ October 16, 2025 2:29 am