The Reserve Bank of Australia has cut the cash rate by 0.25% to 2.25%.
It is the first movement in interest rates for eighteen months. The bank cut rates by 0.5% during 2013 but made no changes in 2014.
In a statement, the Governor of the Reserve Bank, Glenn Stevens, said commodity prices have continued to decline and the price of oil has fallen significantly in recent months. Lower energy prices will strengthen global output and lower inflation. However, the bank says growth in Australia “is continuing at a below-trend pace”.
Stevens says the interest rate cut will “is expected to add some further support to demand, so as to foster sustainable growth and inflation outcomes consistent with the target”.
Statement from Glenn Stevens, Governor of the Reserve Bank of Australia.
Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to lower the cash rate by 25 basis points to 2.25 per cent, effective 4 February 2015.
Growth in the global economy continued at a moderate pace in 2014. China’s growth was in line with policymakers’ objectives. The US economy continued to strengthen, but the euro area and Japanese economies were both weaker than expected. Forecasts for global growth in 2015 envisage continued moderate growth. [Read more…]