The Reserve Bank of Australia (RBA) has cut the country’s official cash rate by 25 basis points, reducing the interest rate to 3.50 per cent. The RBA’s board cited stagnant global growth and a deteriorating situation in Europe as the main influencing factors. The RBA found that financial market sentiment has continued to deteriorate over the past month, partially informed by the conditions in Europe.

 

The central bank warned that available indicators suggest continued modest growth in the first half of 2012, with significant variation across sectors. The RBA cited a gradual firming of the labour market, notwithstanding the spate of high profile job shedding.

 

“At today's meeting, the Board judged that, with modest domestic growth and a weaker and more uncertain international environment, the outlook for inflation afforded scope for a more accommodative stance of monetary policy,” RBA Governor Glenn Stevens said.

 

“As a result of earlier changes to monetary policy, interest rates for borrowers have declined to be a little below their medium-term averages. Business credit has increased more strongly in recent months, though credit growth remains modest overall.”