NEW YORK, Dec 12 (Reuters) - The Reserve Bank of Australia prefers a weaker Australian dollar, trading closer to US$0.85, than lower interest rates as a means to spur the economy, The Australian Financial Review on Thursday quoted RBA Governor Glenn Stevens as saying.
“To the extent that we get some more easing in financial conditions, at this point it’s probably more preferable for that to be via a lower currency at the margin than lower interest rates,” Stevens said in a report.
In AFR’s report, Stevens also said with the falling terms of trade, he expects the Australian dollar’s natural level to be lower than its current rate, which was US$0.8927 on Thursday. The Aussie dollar fell as low as US$0.8919, a roughly 3-1/2-month low.
“I thought US85¢ would be closer to the mark than US 95¢ ...but really, I don’t think we can be that precise.”
The AFR said Stevens’ remarks suggest the RBA is likely to keep official interest rates on hold in coming months after delivering 2.25 percentage points of reductions over the past two years.