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Interest rates cut down under

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Interest rates cut down under
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Australia’s central bank has cut the cost of borrowing there for the first time since the global financial crisis more than two years ago.

As expected the benchmark rate was reduced by 0.25 percent to 4.5 percent.

That was in response to low inflation in Australia and threats to the global economy from Europe’s debt problems.

The Australian dollar slipped after the Reserve Bank of Australia cut rates saying inflation was now likely to be more consistent with its long-term target in both 2012 and 2013.

“The board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2-3 percent inflation over time,” RBA Governor Glenn Stevens said in a statement.

The bank last cut rates in April 2009 when it was easing aggressively in response to the global financial crisis.

However economists doubt this is the start of a series of cuts given that Australia’s mining sector is still booming.

“They’ve recognised that inflation is lower and they’re a little bit more cautious on the global outlook,” said Paul Brennan, head of market economics at Citi.

“It all says it is sensible to bring back policy from restrictive to neutral and they’ll keep it on neutral now for an extended period,” he added. “Unless there’s some big surprises over the next couple of months, I think rates are on hold for quite a while.”