Australia’s central bank cuts interest rate by 25 basis points to 3.25%
Sydney, Australia (4E) – Australia’s central bank announced on Tuesday that it was cutting interest rate by 25 basis points as the slowing global economy was weighing on domestic economic growth. The move mostly took the markets by surprise and it was the first cut in the cost of borrowing since June.
The Reserve Bank of Australia (RBA) decision to cut rates to 3.25 per cent is prompted by the slowing Chinese economy and the recession in the euro zone. The country’s resources sector, the major driver in the country’s economic growth, is expected to achieve lower investment than predicted next year.
The RBA .also said that the move was a response to the strengthening local currency and weak export prices.
Before the RBA’s announcement, economists has expected the central bank will hold on with the rate policy decision until they have the inflation figures out later this month.
Both the U.S. Federal Reserve and the European Central Bank have taken stimulus measures to boosts up market confidence in September, while the People’s Bank of China has eased monetary policy to boost liquidity in the money markets.
Australia’s economic growth in recent years has been dominated by its shipments of resources to China. Slowing demand from the world’s second largest economy has forced Australia to turn inward by boosting domestic demand and consumption in order to meet its gross domestic product growth target of at least 3.5 per cent.