Australia's central bank today cut interest rates for the first time in more than two years as unemployment rises, inflation moderates and the global economy continues to pose risks.
The Reserve Bank of Australia said while fears of a major global downturn had not yet been realised, a 0.25 percentage point cut to 4.5% was appropriate as it seeks to restore impetus to the economy.
"Over the past year, the Board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation," Governor Glenn Stevens said in announcing the first rate cut since April 2009.
"With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the Board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2-3% inflation over time."
Interest rates last moved in November 2010 when the RBA lifted them 0.25% to 4.75%, continuing a climb that began in October 2009 after Australia survived the global financial crisis without dipping into recession.
The latest move had been widely expected, particularly after the release of inflation data last week put the underlying measure through the year at 2.5% - snugly within the bank's 2-3% target zone. Unemployment has also crept up in recent months, hitting as high as 5.3%, while a buoyant Aussie dollar has crunched manufacturing, forcing one major steelmaker to lay off 1,000 workers.
Analysts said concerns about Europe's lingering debt problems and its potential impact on the global economy had also been taken into the central bank's reckoning that monetary policy had become too tight.
Australia slashed rates aggressively during the financial crisis, bringing them as low as 3%, before becoming the first major advanced economy to announce a hike after the downturn.
