Investing.com – The Reserve Bank of Australia cut its benchmark interest rate for the second consecutive month in December, citing fears over the euro zone’s sovereign debt crisis and its impact on the global economy, it announced on Tuesday.
In a statement, the RBA said it was lowering its benchmark interest rate to 4.25% from 4.50%, in line with market expectations. The central bank lowered rates to 4.50% from 4.75% in the preceding month, the first back-to-back easing since February 2009.
In its accompanying rate statement, RBA Governor Glenn Stevens said, “Financing conditions have become much more difficult, especially in Europe. This, together with precautionary behavior by firms and households, means that the likelihood of a further material slowing in global growth has increased.”
The statement continued, “China's growth has been slowing, as policymakers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.”
“Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.”
Following the decision, the Australian dollar was sharply lower against its U.S. counterpart, with AUD/USD tumbling 1.02% to trade at 1.0167.
In a statement, the RBA said it was lowering its benchmark interest rate to 4.25% from 4.50%, in line with market expectations. The central bank lowered rates to 4.50% from 4.75% in the preceding month, the first back-to-back easing since February 2009.
In its accompanying rate statement, RBA Governor Glenn Stevens said, “Financing conditions have become much more difficult, especially in Europe. This, together with precautionary behavior by firms and households, means that the likelihood of a further material slowing in global growth has increased.”
The statement continued, “China's growth has been slowing, as policymakers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.”
“Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.”
Following the decision, the Australian dollar was sharply lower against its U.S. counterpart, with AUD/USD tumbling 1.02% to trade at 1.0167.