Cash Rate Cut Follows Global Slowdown
The Board of the Reserve Bank of Australia lowered the cash rate today by 25 basis points to 3.25 per cent - the lowest level in three years.
RBA Governor Glenn Stevens said the bank’s decision behind this cash-rate-cut was influenced by a world economy that has weakened in recent months.
“Economic activity in Europe is contracting, while growth in the United States remains modest. Growth in China has also slowed and uncertainty about near-term prospects is greater than it was few months ago,” Governor Stevens said.
Mr. Stevens suggested this meant a decrease in outlook risk and global GDP.
Although expectations of addressing Europe’s financial challenges were high, the financial markets responded positively, Mr. Stevens informed.
A second reason for the monetary policy decision was a weakened labour market. “Labour market data have shown moderate employment growth and the rate of unemployment has thus far remained low,” Mr. Stevens revealed. “The Bank's assessment, though, is that the labour market has generally softened somewhat in recent months.”
Mr. Stevens forecasted a weaker market growth next year, with the carbon price continuously affecting consumer prices. He said the Board suggested Australia continues to improve its productivity performance and to press labour costs in order to keep inflation low.