The Reserve Bank of Australia (RBA) has cut the official cash rate by a quarter of a per cent to 2 per cent, in a move that was predicted by most, but not all economists.
Today’s monetary policy statement by Glenn Stevens explained that while growth in the global economy was progressing, commodity prices have declined sharply.
The focus on external factors continued in the statement which suggested the Federal Reserve would increase its policy rate later in the year with a judgement that financial conditions remain accommodative.
A combination of weak household spending and subdued business investment suggests spare capacity will remain in the economy for some time.
It was conceded the rate cut was likely to further inflame an already hot property market which has seen house prices in Sydney surging higher in the first quarter of the year.
The RBA governor says while the local currency has depreciated against the US dollar it still remains high against other currencies and needs to come down further.
The statement closes saying the inflation outlook provided the opportunity for monetary policy to be eased further.
