|
 |
| Australian central bank slashes interest rates by 100 basis points |
|
Time is GMT + 8 hours
Posted: 2-Dec-2008 14:46 hrs |
|
| The signage on the building housing Australia's Reserve Bank in central Sydney on December 2. The country's central bank has slashed interest rates by 100 basis points in the latest in a series of aggressive cuts sparked by the global financial crisis. |
| |
|
|
Australia's central bank slashed interest rates by 100 basis points to a six-year low Tuesday in an aggressive move against threats to growth posed by the global financial crisis.. The bigger-than-expected cut by the Reserve Bank of Australia (RBA) dropped the official cash rate to 4.25 percent, its lowest level since May 2002.. It was the fourth consecutive monthly cut by the RBA, which has sliced a total of 300 basis points off the official rate since September, as inflation fears give way to concern about the impact of slower world economic growth .. Most financial market economists had expected a 75 basis point reduction, although with the bank having opted for a big one percentage point cut in October a repeat was not totally unexpected.. The cut failed to boost the Australian stock market in the face of a major fall on Wall Street overnight, and share prices closed down 4.2 percent with major miners and financials leading the slide.. "Recent actions by governments and central banks to stabilise their respective financial systems have begun to take effect," RBA governor Glenn Stevens said in a statement.. "Nonetheless, financial market sentiment remains fragile, as evidence accumulates of weak economic conditions in the major countries and a significant slowing in many emerging countries.". The Australian economy had been more resilient than others, but recent data indicated that a significant moderation in demand and activity had occurred, he said, and it was likely inflation would soon start to fall.. Data released by the TD Securities-Melbourne Institute Monday showed annual inflation fell from 3.9 percent in October to 3.0 percent in November -- just at the top end of central bank's 2.0-3.0 percent target.. "The previous inflation problem has been turned on its head," TD Securities senior strategist Joshua Williamson said. "There has been a quite staggering turnaround in price pressures in recent months.". The RBA noted, however, that there had been a major easing in monetary policy over the past few months along with a fiscal stimulus package by the government worth 10.4 billion dollars (6.76 billion US).. "Together with the spending measures announced by the government, and a large fall in the Australian dollar exchange rate, significant policy stimulus will be supporting demand over the year ahead," Stevens said.. Economists said the tone of the statement suggested the RBA could proceed with more caution in 2009, slowly lowering the cash rate to multi-decade lows under 4.00 percent.. "This statement could be read as a signal that the period of large, rapid rate cuts is drawing to a close," said Michael Blythe, chief economist at the Commonwealth Bank of Australia.. Further rate cuts would likely be more modest and dependent on the data flow, he said.. The RBA's cut came after rates in China were slashed last week. The Bank of England, the European Central Bank and the Reserve Bank of New Zealand are also expected to ease policy further this week.. Federal Treasurer Wayne Swan urged major commercial banks to pass on the rate cut in full to their customers.. "This is a vital rate cut, delivered at a time when all our joint efforts are directed towards strengthening the economy and protecting Australian jobs," he told parliament.. Economists expect third-quarter economic growth data due out Wednesday will show the economy grew by just 0.2 percent over the quarter, or 1.9 percent from a year earlier. — AFP
|
