More interest rate cuts possible

The Reserve Bank of Australia has left the door open to further rate cuts due to the “uncomfortably high” position of the Australian dollar. Official minutes of the RBA meeting in November revealed a decision to keep rates unchanged at 2.5 per cent, but also a reluctance to draw a line under additional further rate cuts.
The RBA also found the effect of rate cuts had been felt in the housing market but was taking longer to be felt elsewhere in the economy. RBA governor Glenn Stevens told an economists’ dinner that he kept an open mind about using a foreign exchange intervention to weaken the Australian dollar. Mr Stevens said the bank had yet to determine whether a large-scale intervention was worth the cost versus the effectiveness. He said the RBA position was that foreign exchange intervention could be effective and useful, but it could not make up for weaknesses in other policy areas and had to improve fundamentals.

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