The last thing people expect from their central banker is a good joke. In fact, unexpected attempts at humor by normally deadpan officials can backfire, as Glenn Stevens, governor of the Reserve Bank of Australia, just learned.
The last thing people expect from their central banker is a good joke. In fact, unexpected attempts at humor by normally deadpan officials can backfire, as Glenn Stevens, governor of the Reserve Bank of Australia, just learned.
Opening a speech today, Stevens took a swing at levity before an assemblage in Brisbane. Here’s what he said, according to the AAP wire.
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As you may know, the Reserve Bank board in fact held its meeting here in Brisbane yesterday, at which we deliberated for a very long time and then we acted to stick with the cash rate unchanged.
In case you’re searching for the joke here, it’s that the Reserve Bank board “deliberated for a very long time,” which suggests that the central bank was considering a rate cut. The country has been struggling to tame the soaring value of the Australian dollar against other currencies, partly the result of easy monetary policies around the world.
That’s not necessarily what Stevens meant by the quip, but that’s how the markets interpreted it. Malcolm Maiden at the Age in Melbourne thinks the real joke Stevens was trying to make has to do with the fact that the RBA has a fairly fixed amount of time to decide on rate cuts, which is not “a long time.”
In any case, the remark sent the Australian dollar tumbling. Bloomberg reporters sent a flash to subscribers: “Stevens says Board deliberated for a Very Long Time Y’Day.” And the Aussie fell to a three-year low of less than 91 cents agains the US dollar. Here’s a look at the trading over the last few hours. (Time along the bottom axis is New York.)
Joking aside, the idea of a rate cut in Australia is not so ludicrous. While Australia’s resource-oriented, China-dependent economy seems to be holding up fairly well, it’s very much exposed to a slowdown in emerging markets. Meanwhile, inflation doesn’t seem to be a concern.
Also, a weaker Australian dollar isn’t necessarily a bad thing for the Australian economy, since it makes the country’s exports cheaper for foreign buyers. That’s helping to maintain Australia’s low trade deficit. In fact, Australia just posted its highest trade surplus in 18 months in May, thanks to solid mining exports.
