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How to weigh up today’s RBA concerns and make money

What: The Reserve Bank of Australia (RBA) released the minutes of its July board meeting today. While stating that, “low interest rates were working to support demand” an air of uncertainty prevailed by further stating that ”it was difficult to judge the extent to which this would offset the…decline in mining investment and the effect of planned fiscal consolidation.”

So What: In short, the RBA expressed concern whether current low interest rates would offset economic concerns. Other comments included the following:

1. Recent forward-looking indicators had been mixed and “consistent with only moderate growth in employment”.

2. “After picking up through last year, household consumption growth also appeared to have eased”.

3. “The most prudent course was likely to be a period of stability in interest rates”.

Now What: In my opinion, interest rates will be at the very least maintained at current levels for a sustained period, with the possibility of further reductions. This confirms that investors are playing the right theme in targeting high-yielding stocks, rather than being taxed on miserly bank deposit rates.

It makes the likes of Telstra Corporation Ltd (ASX: TLS), National Australia Bank Ltd.  (ASX: NAB) and Insurance Australia Group Limited (ASX: IAG) very appealing as they are yielding 5.31%, 5.79% and 6.38% respectively.

An even better proposition has been unearthed by our Top Motley fool analysts. Nominated as their No 1 pick for 2014, they have uncovered a smaller undervalued stock investors can buy for greater growth potential and still obtain a fat dividend yield of over 7%, including franking credits.

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Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article.

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