The Reserve Bank of Australia (RBA) has cut the official cash rate by 25 basis points to a new record low of 2.5 per cent, in line with expectations.
Explaining the decision, RBA Governor Glenn Stevens says the global economy is likely to record growth a little below trend this year, before picking up next year.
He says volatility in financial markets has increased and has affected a number of emerging market economies.
Mr Stevens says growth in Australia has been a bit below trend in 2013 and that unemployment has increased slightly, while inflation remains consistent with the medium-term target.
The RBA notesfinancial conditions remain very accommodative globally, but the change in market outlook for US monetary policy has seen a noticeable rise in sovereign bond yields, from exceptionally low levels.
It says commodity prices have declined in recent months though they remain high by historical standards.
The Australian dollar spiked on the news.
