Strong dollar, low inflation allow rates to stay on hold - Shadow RBA

A strong Australian dollar and low inflation mean Australia's official interest rates should remain on hold in August despite signs of improving economic health, The Australian National University (ANU) RBA Shadow Board has found. The board of the Reserve Bank of Australia (RBA) will meet on Tuesday to review official interest rates, which have been at a record low of 1.5 per cent since August last year. Chair of the RBA Shadow Board Dr Timo Henckel said strong growth in full time jobs in June, and an increased participation rate, pointed to an overall improvement in the nation's economic health. But official inflation fell from 2.1 per cent to 1.9 per cent in the June quarter, below the Reserve Bank's 2-3 per cent target band, while the Australian dollar has hit two-year highs and traded above US80 cents in recent weeks, helping to further contain prices. "Consequently, the RBA Shadow Board continues to advocate a hold-and-wait policy," Dr Henckel said. "The Aussie dollar, relative to the US dollar, after falling the previous month has continued its surprise appreciation, trading above US80 cents late this month. This helps keep a lid on inflation by lowering import prices and slowing aggregate demand." Dr Henckel said while the economy added 62,000 full time jobs in June, the youth unemployment rate rose to above 13 per cent, which was a worrying sign.