RBA Unexpectedly Cuts Interest Rate

RBA Unexpectedly Cuts Interest Rate

The Reserve Bank of Australia on Tuesday unexpectedly lowered the benchmark cash rate by 25 basis points to 3.25 percent, effective October 3.

Economists expected the central bank to retain the rate at 3.5 percent. In a statement, Governor Glenn Stevens said the Policy Board judged that "on the back of international developments, the growth outlook for next year looked a little weaker."

Inflation, however, is expected to be consistent with the target. The Board, therefore, decided "it was appropriate for the stance of monetary policy to be a little more accommodative," Stevens said.

On the developments in global economy, the Board said the outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down. Risks to the outlook still seen to be on the downside.

Economic activity in Europe is contracting, while growth in the United States remains modest. Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago, it noted.