Although some economists believed recent inflation data would force the Reserve Bank of Australia (RBA) to hold steady on its benchmark cash rate, a majority of the smart money was betting on a rate cut. And the central bank delivered.

On Tuesday, the RBA announced it had decided to lower its benchmark cash rate by a quarter point, to 2.25%. Prior to this week, the central bank’s rate-cutting cycle had been on pause since August 2013, when it lowered the cash rate to a then all-time low of 2.5%.

Thereafter, each statement that accompanied the bank’s decision on monetary policy included the soothing language that the “most prudent course is likely to be a period of stability in interest rates.”

And while some economists might have preferred the removal of that statement as an interim step toward an eventual rate cut, sometimes events overtake such niceties.

In this case, with so many of Australia’s central bank peers initiating further monetary easing in recent weeks, any delay in a rate cut beyond this meeting might have brought upward pressure on the country’s exchange rate.

Even with short-term rates at an all-time low, Australia’s debt still yields more than many of its developed-world peers, and if the RBA had failed to keep pace with other dovish central banks then that would have enticed capital inflows and undercut the aims of its policymaking.

The bank sees a lower exchange rate as crucial for the economy’s eventual rotation away from the resource sector, which is well past its peak in investment and suffering from sharp declines in global commodities prices.

RBA Governor Glenn Stevens has previously stated that he believes the fundamentals support an exchange rate near USD0.75.

And with the latest rate cut, that threshold is increasingly near. The Australian dollar currently trades around USD0.78, well down from the days when the resource boom pushed it as high as USD1.10 in mid-2011.

But Mr. Stevens is unrelenting. In his latest statement, he observed that even at current levels, the aussie “remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices.”

In fairness, he’s not merely looking at the currency’s erosion against the U.S. dollar, but also its performance against a basket of currencies, where it’s somewhat stronger.

In many ways, the country had become overly dependent on the resource sector, and a lower exchange rate will make the country’s exports more competitive in the global market, which should spur growth in some of the non-mining sectors. Given its proximity to fast-growing emerging Asia, Australia’s exports account for about 20% of its gross domestic product (GDP), compared to 13.5% for the U.S.

For now, the RBA says growth in domestic demand remains quite weak, while the flagging resource sector will keep the country’s economy operating at a below-trend pace “somewhat longer.”

In its semiannual Statement on Monetary Policy, the central bank reduced its forecast for full-year 2015 growth to a range of 1.75% to 2.75%, down from a prior range of 2% to 3%.

According to The Australian, J.P. Morgan chief economist Stephen Walters said the growth downgrade seemed to have been prompted by “cautious tales being told by corporates around their investment plans, gathered through the bank’s unpublished liaison process.”

Another factor in its outlook is that the bank expects unemployment to peak at 6.5% in 2016, a 15-year high. That’s a little later than it had previously expected, though the country’s unemployment rate is already at 6.1%.

Although the bank often includes some form of guidance with its monetary policy announcements, it was uncharacteristically silent on the future direction of interest rates. Economists with Westpac note that this gives the RBA “full flexibility to determine its next policy move without making any commitment to the market.”

Nevertheless, the market is fully capable of coming to conclusions on its own. And on that score, traders appear to be pricing in at least two more rate cuts. Based on futures data aggregated by Bloomberg, a plurality of traders expect to see the short-term cash rate at 1.75% or lower by August.

Portfolio Update

By Khoa Nguyen

Aggressive Holding JB Hi-Fi Ltd (ASX: JBH) announced first-half fiscal 2015 NPAT (net profits after tax) fell 2%, to AUD88.5 million, missing consensus estimates of AUD90.6 million.

The drop was due to weaker sales and increased expenses. The company’s cost of doing business rose 29 basis points, to 14.2% of sales, causing EBIT (earnings before interest and taxes) to fall about 2.2%, to AUD130 million.

Revenues for the six-month period (ended Dec. 31) rose 1.3%, to AUD1.96 billion.

Software and tablet sales were weak, though tablet sales are now declining at a slower rate than previous quarters.

Online sales were a bright spot, increasing 13.5%, to AUD48.7 million, in the first half, and the category now represents about 2.5% of total sales.

JB Hi-Fi announced a 4% increase to its interim dividend, to AUD0.59 per share, payable on Feb. 27, 2015, to shareholders on record as of Feb. 13, 2015.

Despite the lackluster half, JB Hi-Fi CEO Richard Murray said that the company maintained pricing leadership, kept costs under control, and invested in future growth in key sales categories.

Consolidated revenue growth in January jumped 8.9%, as stronger computer sales and connected-fitness products such as Fitbits drove sales. Management expects this momentum will continue through the end of the fiscal year.

The company reaffirmed its full-year revenue target of AUD3.6 billion, up 3.5% compared to the prior year. It also expects NPAT in the range of AUD127 million to AUD131 million for the year, compared to AUD128 million in fiscal 2014.

JB Hi-Fi is a buy below USD18.

Shares of Aggressive Holding Origin Energy Ltd (ASX: ORG, OTC: OGFGF) have surged 11% in February due in part to a recent recovery in oil prices.

The company’s stock also received a boost from news that Seven Group Holdings appears to be positioning itself for a possible takeover of a small oil and gas company in Australia’s Copper Basin. This caused shares of energy producers that operate in the region, including Origin, to jump in recent days.

At the same time, in the wake of BG Group’s $4.1 billion write-down of its Australian liquefied natural gas (LNG) venture, other analysts expect other firms with LNG ventures, such as Origin, to follow suit with write-downs of their own.

Origin isn’t scheduled to report fiscal first-half earnings until Feb. 19, but it did release its production report for the calendar fourth quarter.

Revenue dropped 16% year over year, to AUD235.6 million, on a 4% decline in sales volumes.

The company reported that total production fell 10% year over year, to 33.4 PJe (petajoules–5.83 petajoules is roughly 1 million barrels of oil equivalent).

The decline in total production was due to reduced operations from its Otway, BassGas and Kupe assets, due to maintenance along with a planned shutdown of its BassGas assets. Increased production at its AP LNG (Australia Pacific Liquefied Natural Gas) venture, which is about 88% complete, offset some of this decline.

Management noted that its AP LNG project is on schedule for first LNG in the middle of the year. As of mid-December 2014, the project has drilled about 1,019 of its 1,100 targeted wells.

Origin is a buy below USD15.