RBA monetary policy statement says currency is too strong

The Reserve Bank of Australia's latest quarterly statement on monetary policy says the country's currency is too strong for the economy to be able to achieve balanced growth, though it remains 6% cheaper on a trade-weighted basis than it was at the time of the May statement.

After depreciating between May and early August, the statement said the Australian dollar appreciated following a "reassessment by markets of the likely path of US monetary policy" after the Federal Reserve failed to taper purchases in September, and thanks to "some more positive Chinese data".

At its meetings since August, the RBA board has judged that "given the substantial degree of monetary policy stimulus" already in place, it has been appropriate to hold the cash rate steady, "but not to close off the possibility of reducing it further, should that be needed to support economic activity consistent with the inflation target", according to the statement.

Consumer price inflation, it said, "has been at or below the middle of the inflation target range over the past year, consistent with the generally subdued growth of domestic demand and costs". Although inflation picked up in the September quarter, "much of this owed to an increase in the price of fuel", the statement said.