Should interest rates be used to ‘manipulate’ the exchange rate?

This comment was made this week at http://www.macrobusiness.com.au  (link may be locked) in response to a post about the RBA rate cute.

http://www.macrobusiness.com.au/2015/02/nobody-clue-australias-real-problem/

“…….,Rate cuts to 1% will push the Aussie to 60 cents. If that’s coupled with firm macroprudential then it’ll work…..,”

And Flawse thinks I am an optimist.

Firm macroprudential !

Believe that when we see it.

The RBA are cutting rates to stimulate debt into housing.

No one else is borrowing.

If you want the $AUS to continue to fall you need to slow demand for it.

Rather than fiddle with interest rates – do it directly – Have APRA direct the banks to reduce their use of wholesale off shore markets rather than increasing it as they started to do again 18 months ago.

Get the govt to stop flogging bonds off shore.

That will reduce off shore demand and reduce the $AUS without the ponzi effects of gutting the target rate and hoping MP can distinguish between bad borrowers and good borrowers.

Follow link for Flawse’s response!

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