RBA's bad joke for travel money

Friday 05 July 2013

Article by Mozo

A light hearted comment by the Reserve Bank of Australia (RBA) will not likely be found funny by anyone who was planning to purchase travel money on Wednesday.

Not laughing after bad travel money joke.

The Australian dollar fell to a three year low after a joke by RBA governor Glenn Stevens was misinterpreted as a hint that the RBA would be likely to cut interest rates again in August, reports CFOworld.com.

"I can confirm for you that the board did deliberate for a very long time. I can also confirm for you that it always deliberates for a very long time," said RBA governor Glenn Stevens following what was intended to be a light hearted introduction to a speech given in Brisbane on Wednesday.

RBA deputy governor Phillip Lowe has confirmed that the comment was an attempt at humour. However the joke has left the market straight faced after it misconstrued the crack as an indication of a significant chance of an interest rate cut in August. Almost immediately the Australian dollar fell into a downward spiral, falling below 91 US cents to its lowest level in 3 years and even provoking the ANZ bank to revise its own interest rate forecast for the year.

"The 'joke' was important in our decision to add a further rate cut in August," ANZ economists said in a statement on Thursday. The bank has now of course returned to its original forecast for another rate cut in November.

According to AAP chief economist Gary Shilson-Josling 'Central bankers know very well that people in financial markets will be going over their comments with a fine-tooth comb. I suspect that Mr Stevens will be much more careful with his choice of words in future."

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