Yesterday, the RBA cut interest rates to an historic low of 2.75%
Governor Glenn Stevens, in the RBA statement explaining the Reserve Bank’s thinking, seemed to be generally
upbeat about the Australian economy but again was worried about the high Australian dollar.
As we commented on a previous interest rate cut, when you have the best economy in the world, it’s surprising that the experts are surprised by a strong currency.
Anyway, in the words of Mr Stevens
“The Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand. At today’s meeting the Board decided to use some of that scope. It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.”
No doubt Reserve Bank will be surprised again in 6 months’ time at the robustness of the Aussie. Maybe they can just copy and paste this from the current press release.
“The exchange rate, on the other hand, has been little changed at a historically high level . . . “