SYDNEY (AFP) — Australia’s central bank slashed interest rates by 100 basis points to a six-year low Tuesday in an aggressive move against threats to growth posed by the global financial crisis.
The bigger-than-expected cut by the Reserve Bank of Australia (RBA) dropped the official cash rate to 4.25 percent, its lowest level since May 2002. It was the fourth consecutive monthly cut by the RBA, which has sliced a total of 300 basis points off the official rate since September, as inflation fears give way to concern about the impact of slower world economic growth. Most financial market economists had expected a 75 basis point reduction, although with the bank having opted for a big one percentage point cut in October a repeat was not totally unexpected. The cut failed to boost the Australian stock market in the face of a major fall on Wall Street overnight, and share prices closed down 4.2 percent with major miners and financials leading the slide. “Recent actions by governments and central banks to stabilize their respective financial systems have begun to take effect,” RBA governor Glenn Stevens said in a statement. “Nonetheless, financial market sentiment remains fragile, as evidence accumulates of weak economic conditions in the major countries and a significant slowing in many emerging countries.
The bigger-than-expected cut by the Reserve Bank of Australia (RBA) dropped the official cash rate to 4.25 percent, its lowest level since May 2002. It was the fourth consecutive monthly cut by the RBA, which has sliced a total of 300 basis points off the official rate since September, as inflation fears give way to concern about the impact of slower world economic growth. Most financial market economists had expected a 75 basis point reduction, although with the bank having opted for a big one percentage point cut in October a repeat was not totally unexpected. The cut failed to boost the Australian stock market in the face of a major fall on Wall Street overnight, and share prices closed down 4.2 percent with major miners and financials leading the slide. “Recent actions by governments and central banks to stabilize their respective financial systems have begun to take effect,” RBA governor Glenn Stevens said in a statement. “Nonetheless, financial market sentiment remains fragile, as evidence accumulates of weak economic conditions in the major countries and a significant slowing in many emerging countries.
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