Reserve Bank Governor Glenn Stevens defended the central bank’s inflation targeting, voicing intentions of remaining vigilant against the risks of continued low interest rates.

In what may be his last public speech before stepping down as the head of Australia’s central bank, Stevens said he disagreed with the view that the RBA’s code guide for monetary policy should be changed, adding that inflation was currently a “bit too low. ”

“I think it’s easily the best monetary policy framework we’ve ever had,” he said of the 2-3 per cent inflation target over the medium-term. “It has worked well and I think it will keep working well.”

The Australian dollar slid on the comments with the local currency dipping below US72c as traders saw no need to revise expectations for at least one more rate cut this year.

Economy Reasonable

Despite the weaker-than-expected inflation numbers, Stevens said the economy was performing reasonably, but not at the desired rate. The RBA Governor reiterated recent forecasts from the Treasury, which are tied to the Federal Government’s latest budget, saying the projections are broadly in line with those of the central bank but warned that there is a long road ahead to returning the budget to surplus as the risks continue to lean downward.

The Reserve Bank’s first move on rates in the past year was announced at the most recent board meeting on May 3, sending the cash rate to a record low of 1.75 per cent despite concerns regarding the possibility of creating additional stimulate in the housing market.