Australia: Central bank cuts rates to record low

ANKARA

The Reserve Bank of Australia has cut interest rates by 25 basis points to a record low of 2 percent on Tuesday. 

Rising real estate prices in Sydney, Australia’s largest city by population, and the rising value of the Australian dollar against other currencies, as well as a drop in commodity prices are among the reasons for the bank’s interest rate cut.

“The global economy is expanding at a moderate pace, but commodity prices have declined over the past year, in some cases sharply,” Glenn Stevens, governor of the bank said in a statement after the board meeting. 

 “These trends appear largely to reflect increased supply, including from Australia.  Australia's terms of trade are falling nonetheless.” Stevens added.

The Australian dollar has declined noticeably against a rising dollar over the past year, though less so against a basket of currencies.

“Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices,”  Stevens said.

Housing prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities, the statement said.

“The Bank is working with other regulators to assess and contain risks that may arise from the housing market,” the bank said.

The bank cut interest rates for the first time in February.

Central banks from Europe, and emerging markets such as China and India, have been cutting rates to boost growth and fuel inflation.

The Federal Reserve is, however, planning a rate hike sometime this year.