This is the second time in as many months after the central bank cut rates for the first time in almost three years last month and makes Australia the sixth-lowest interest rate in the world. The second cut was in line with economist expectations, with several still expecting a further cut later in the year.
RBA governor Philip Lowe said the decision had been taken as inflation remains subdued, housing market conditions remained soft and the Australian economy was growing below trend. He also noted there was global uncertainty regarding trade wars which meant the risks to the global economy were tilted to the downside.
“Today’s decision to lower the cash rate will help make further inroads into the spare capacity in the economy. It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target,” he said.
Commenting on the move, Anthony Doyle, investment specialist at Fidelity International, said the move was a “clear signal” that Australia required further monetary policy stimulus.
“In cutting interest rates, the RBA has sent a clear signal that it believes that the Australian economy requires further monetary policy stimulus in order for it to stand a chance of meeting its inflation objective.
“Australia’s central bank is pinning its hopes of raising inflation on driving the unemployment rate lower in an attempt to stoke wage pressures within the domestic economy. To this end, the unemployment rate will be a key indicator as to whether further monetary stimulus is required before the end of the year.”
