Australia’s central bank cut its benchmark interest rate to a new record low and said the local currency remains overvalued, joining a dozen global counterparts in easing policy this year as commodity prices tumble.
The overnight cash rate target was lowered by 25 basis points to 2.25 percent, Governor Glenn Stevens said in a statement. Growth will be weaker for longer and the jobless rate peak higher than earlier expected, he said.
Stocks surged to an almost seven-year high, the currency traded at a more than 5 1/2-year low and bond yields dropped to a record following the decision. Stevens’s move to cut follows a collapse in the price of iron ore, which generates A$1 in every A$5 of export income, and a rush to ease among global policy makers that threatened to drive Australia’s currency higher.
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