Australia lowers rates to reach 1.25% for first time

Tuesday, 04. June 2019 07:18

Economic conditions warranted a loosening in monetary policy, according to the Reserve Bank of Australia. Policymakers decided on Tuesday to change the cash rate for the first time in almost three years and the benchmark was cut by 25 basis points to 1.25%, a record low. The board said its intention is to "support employment growth and provide greater confidence" in achieving price stability.

The statement reveals concerns about the trade wars between the United States and its major partners and the impact on investment plans "in a number of countries." The global economy has a "reasonable" outlook, however, the central bank claimed and highlighted China's stimulus and the measures to prop up stability. On the flipside, inflation is still subdued in most of the developed economies, rate-setters stressed.

"The central scenario remains for the Australian economy to grow by around 2.75% in 2019 and 2020. This outlook is supported by increased investment in infrastructure and a pick-up in activity in the resources sector, partly in response to an increase in the prices of Australia's exports," said RBA, which is led by Governor Philip Lowe, and cited lackluster personal expenditure.

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