Australia Monetary Policy

Australia

Australia: RBA cuts interest rates

November 1, 2011

On 1 November, the Reserve Bank of Australia (RBA) cut the cash rate by 0.25 percentage points from 4.75% to 4.50%, in a move which was widely expected by the markets. The decision marks the first rate cut for nearly a year, after 10 consecutive meetings in which monetary authorities have kept the rates unchanged. According to monetary authorities, recent information is consistent with a moderation in the pace of global growth, though fears of a major downturn have not been borne out so far. The RBA also sees growth moderating in the domestic economy. While investment in the resources sector continues to pick up, a strong exchange rate and prudent household behaviour are having a noticeable dampening effect? on economic activity. With regard to inflation, the RBA believes that it is likely to be consistent with its 2-3% target over next year and the following. Finally, monetary authorities concluded the statement suggesting a shift from a mildly restrictive monetary policy stance towards a more neutral approach, consistent with achieving sustainable growth and 2-3% per cent inflation over time?. According to analysts, the phrasing suggests that RBA is now open to further rate cuts going forward


Author:, Head of Data Solutions

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