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Reserve Bank of Australia lowers interest rate ¼ Percent

April 7th, 2009

Category: Retail Business News

Reserve Bank of Australia Lowers Interest Rate .25%

Reserve Bank of Australia Lowers Interest Rate .25%

The Reserve Bank of Australia Tuesday lowered interest rates a further one quarter of a percentage point to a 49-year low. The reason that was given is that the economy is contracting, but at a slower pace than other major economies. Because the current condition is fairly good in Australia it seems a deeper cut was not warranted.

Governor Glenn Stevens said in his statement the Reserve Bank of Australia will proceed cautiously in coming months, making small adjustments to interest rates only if needed.

“The Australian economy is contracting, though by less than those of its trading partners,” said Governor Glenn Stevens in a statement.

RBA Governor Glenn Stevens

RBA Governor Glenn Stevens

“There are tentative signs of stabilization in several countries, including China, though it is too early yet to judge how durable these will prove to be,” he said.

“The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead,” he said.

The Australian dollar raised after the statement and bond prices fell as speculators ventured that the RBA could be close to the end of its easing cycle. The Australian dollar was quoted recently at US$0.729, up from US$0.7090.

The RBA cut interest rates by 400 basis points between September 2008 and February 2009 as it grappled with the rapid plunge in the world economy toward in late 2008.

The decision Tuesday is “a real compromise” for the central bank, said Katie Dean, senior economist at Australia and New Zealand Banking Group. “Further cuts will be drip-fed from here if indeed they come,” Dean said.

“The RBA has more work to do,” said UBS Chief Economist Scott Haslem.

“We expect the RBA to continue to cut interest rates in similarly-sized steps over the coming six-to-nine months,” he said.< ><-->