In a surprise move to many analysts, the RBA today cut interest rates by 0.25% to 2.75%, a record low for Australia. The Board previously noted that the inflation outlook would afford scope to ease rates further. With inflation being a little lower than expected, Glenn Stevens, RBA Governor, in his statement said that “at today’s meeting the Board decided to use some of that scope”.
He noted that the Australian dollar’s exchange rate had been at a historical high over the last 18 months which was unusual given the decline of export prices and interest rates during that time. Also noted was that the demand for credit remains relatively subdued.
The board judged that an easing of the cash rate was an appropriate measure to encourage sustainable growth in the economy, consistent with achieving the inflation target.
Source: Statement by Glenn Stevens, Governor: Monetary Policy Decision 7 May 2013.