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December 2, 2008

Australia cuts interest rates by 100 basis points

by Richard Kilner

Story link: Australia cuts interest rates by 100 basis points

The Reserve Bank of Australia has continued its series of rate cuts with a 100 basis point reduction in the interest rate to 4.25%.

The change will be effective from 3 December.

Governor Glenn Stevens has released a statement explaining that both emerging and major economies continue to be struggling with the worldwide economic downturn.

This has in turn led to commodity prices to fall, which will lead to inflation also declining significantly during the course of the next year.

Compared to other economies Australia has fared relatively well, but is not immune to the effects of the global downturn and demand and economic activity are weakening as a result.

The Government has stated it is to participate in large spending projects, and this combined with the substantially lower interest rates should bolster the economy.

The Reserve Bank is to maintain its objective of returning inflation to 2-3% over the medium term and will enact monetary policy accordingly.

 

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