Well, these words will be familiar to anyone who reads this blog. One of our most eminent economists, Professor Adrian Pagan, has effectively echoed my position very clearly. Over at The Conversation Pagan argues:
"I think the outlook for growth is pretty good. It’s not spectacular, but you wouldn’t be cutting rates because of that. And I don’t think you should be cutting rates because of an inflation outcome – it’s just one number.
You might argue that they have put rates at the level they’ve been because they thought inflation was going to be stronger, so they’re just reversing a little bit.
Then they’ll be in a position to raise them again if they have to later on.
I can’t see the reason why you would cut interest rates by 25 basis points – I don’t believe in 25 point cuts. I think that’s a silly situation we got into with making such small adjustments. Monetary policy should be conducted with bigger adjustments, although 25 basis-point moves came in when I was on the Board, back in 2000.
And I don’t think the international situation is as bad as everyone thinks it is, but 25 basis points is not a response to that. If you really thought it was bad, you wouldn’t be doing 25, you’d be doing 50 or 75...
Predicting negative outcomes for the international situation is a mug’s game. I don’t think anything much has changed. Mostly people are getting excited about Greek debt, and so on, but even if investors take 50% hair cuts it’s not going to go away. Fundamentally I don’t see that Greece can stay in the Eurozone.
I don’t think it’s going to have a major effect on economic activity, certainly not in Australia anyway.
It could make a slowdown [in Europe], a bit of negative growth, but Europe never grows much anyway so it doesn’t take much to make it edge towards negative growth."
