Australia Cuts Interest Rates to Turn Back Global Deflation Tide

Australia’s central bank cut interest rates to an all-time low of 1.75 percent on Tuesday, the first easing in a year as it seeks to restrain a rising currency and insulate the economy from creeping deflation.

The Reserve Bank of Australia’s (RBA) quarter-point cut sent the local dollar down more than one U.S. cent to $0.7567 as markets wagered a further move to 1.5 percent was now likely.

Banking stocks took off on the prospect of increase demand for mortgages, lifting the benchmark index 1.8 percent.

Speculation of a possible cut flared last week when government data showed inflation had slowed far more than expected in the first quarter of the year.

Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.