Australia’s central bank on Tuesday slashed its benchmark interest rate to a record low of 2.25 percent as it seeks to counter the deflationary impact of falling oil prices, the Wall Street Journal reported.
Governor Glenn Stevens of the Reserve Bank of Australia said the decision to cut rates by 25 basis points was driven by concern that the country’s resources-dependent economy was facing another year of below-average growth.
The Australian dollar fell sharply following the announcement, dropping to a fresh five-and-a-half-year low, while the local stock market surged to the highest level since May 2008.
Several other central banks have cut interest rates or launched stimulus measures to bolster economic growth and employment as weaker currencies make exports more competitive, the newspaper said.
But gains are limited as trading partners try to outdo each other, it added.
“Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns reaching new all-time lows over recent months,” Stevens was quoted as saying.
The case for a rate cut was strengthened by weak inflation data, which showed an absence of price pressures in the economy, the report said.
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