SYDNEY, (Pakistan Point News - APP - 2nd Augst,2016) - Australia's central bank dropped interest rates to a new record low Tuesday after a recent run of soft inflation readings, with some economists forecasting further cuts ahead. The 25 basis point cut to 1.5 percent means the Reserve Bank of Australia (RBA) has slashed rates by 300 basis points since November 2011 to support the economy as it transitions towards non-resources growth after a mining investment boom.
"The board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting," bank governor Glenn Stevens said in a statement. The decision follows official figures last month showing that consumer prices fell to a 17-year annual low of 1.0 percent in April-June, well off the RBA's inflation target of 2.0-3.0 percent. Treasurer Scott Morrison denied that the cut was a sign of a struggling economy, saying that Australia was posting 3.1 percent growth, while Stevens said it was unlikely to overheat the housing market. The majority of economists had forecast that the RBA, an inflation-targeting central bank, would cut interest rates, with 20 out of 25 surveyed by Bloomberg news predicting the move.