RBA cuts rate to 1.5%

Reserve Bank of Australia Governor Glenn Stevens, one policy meeting away from retirement, will leave his deputy and successor, Philip Lowe, with an inheritance that’s confounding counterparts worldwide: very low inflation and limited policy ammunition to combat it. The best result for Australia would be a depreciation in the exchange rate, but with interest rates low and even negative across the developed world, yield-hungry investors are proving tough to discourage.

A number of economists now expect the RBA to remain on hold for the rest of the year. More cuts might be needed if inflation remains low and the currency strengthens.

“The most effective stimulus for the domestic economy outside of fiscal policy now lies with the currency,” said James McIntyre, head of economic research at Macquarie Bank. “And if policy elsewhere poses a threat to the economy’s adjustment through a potentially higher Australian dollar, then the RBA will be drawn into defending the inflation target.”http://www.bloomberg.com/news/articles/2016-08-02/rba-cuts-rates-to-record-low-to-counter-low-inflation-weak-jobs