Added by Nigel Shelbourne on December 8, 2011
Glenn Stevens, Governor of the Reserve Bank of Australia, said, “on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate”, when he announced that Australia’s key lending rate would drop 25 basis points to 4.25%.
The statement said banking problems in Europe are likely to affect Europe’s economy in the months ahead. In addition, households’ and companies’ cautious spending is likely to result in further slowing of the Australian economy; commodity prices, the statement said, have declined in recent months and increased the scope of easing monetary policy in a number of countries due to reduced pressure on CPI inflation rates.
The rate cut comes just one month after the Reserve Bank lowered the cash rate by 25 basis points in November. This is the first time the Reserve Bank has lowered the key lending rate in consecutive months since December 2008, during the height of the global economic crisis.