We cut rates again in July, bringing our policy rate to 0.5 percent, as the persistence and impact of the shock became clearer. Note that throughout this episode, financial vulnerabilities associated with elevated levels of household debt and rising house prices could have motivated higher interest rates, while projections of declining inflation would have favoured lower interest rates.
In other words, financial stability risks were working at cross purposes from macroeconomic risks; cutting interest rates would reduce macroeconomic risks but increase financial stability risks at the same time.