RBA: There was a room for an old-fashioned cut in interest rates - SocGen

Kit Juckes, Research Analyst at Societe Generale, notes that the RBA cut rates to 1.5%, showing that where there is room for an old-fashioned cut in interest rates, a lack of inflationary pressure and a moderate pace of economic growth are reason enough to act.

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“The banner headlines in Australia recording the fact that rates reached a historic record low don’t get the world outside Australia quite so excited: 1.5% seems quite high these days, and there’s definitely less agonising about a cut from 1.75 to 1.5% than about how far into negative territory to go, or how and when to increase asset purchases. On which basis, I wouldn’t rule out another cut in due course if the economy goes on plodding, and an RBA cut next week still seems a very good bet.

For the AUD, the move was well enough anticipated that the reaction is very modest, but pricing in a further on with greater confidence can still keep up some downward pressure on the currency even if, as for every other major currency and most of EMFX, the dollar’s lack of interest rate or yield support is going to limit AUD weakness.”