The Reserve Bank of Australia cut its benchmark interest rate by a quarter percentage point to the lowest since 2009 as Europeâ€™s debt crisis and slower Chinese growth overshadowed a stronger domestic labor market.
Governor Glenn Stevens and his board lowered the overnight cash rate target to 3.5 percent, the RBA said in a statement in Sydney today. Thirteen of 27 economists surveyed by Bloomberg News predicted the move, while four forecast a half-point reduction and 10 expected borrowing costs to remain unchanged.
â€œEuropeâ€™s economic and financial prospects have again been clouded by weakening growth, heightened political uncertainty and concerns about fiscal sustainability and the strength of some banks,â€ Stevens said in the statement. In Asia â€œthe ongoing trend is unclear and could be dampened by slower Chinese growth,â€ he said.
The local currency and stocks maintained earlier advances after Stevensâ€™s second rate reduction in as many meetings. Australiaâ€™s economy is giving mixed signals, with the unemployment rate at a one-year low of 4.9 percent and an investment pipeline worth almost A$500 billion ($489 billion) driving growth in some regions, even as export prices have slumped, building approvals dropped and retail sales weakened.