The quite timid RBA cuts rates yesterday after the quarterly CPI confirmed what everyone else knew that inflation was falling into their target area.
At least from november they will have a comprehensive monthly CPI to assist them. ( Hey Nick I saw your brother on TV discussing this)
The main question we must ask is how far should they cut to? I have always advocated cutting to the neutral rate and then staying there to take breath as we do not need contractionary monetary policy.
BUT BUT BUT what is the neutraL state? It would appear somewhere between 3 and 3.5% so I saw move to 3.25% and leave it there.
Fiscal policy is expansionary. I do not believe we need monetary policy to be expansionary as well. We have to be wary of a recovery that is too strong
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