Reserve Bank of Australia Cuts Rates to Record Low

Reserve Bank of Australia’s Governor Glenn Stevens on Tuesday cut the overnight cash-rate by 25 basis points to 1.75 percent. This is the first change in interest rates since May 2015, when interest rates were cut 25 basis points to 2 percent.

Prior to the decision, data showed quarterly deflation in the consumer price index and the weakest annual gain on core inflation.

“Inflation has been quite low for some time and recent data were unexpectedly low,” Stevens said in his statement. “These results, together with ongoing very subdued growth in labor costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.”

Australian dollar plunged after the decision, reaching 75.17 U.S. cents as of 8:45 A.M. in New York, from as high as 77.17 cents earlier in the day.

Building permit application rose 3.7 percent from 2.9 percent recorded in previous month, beating economists forecast of -1.8 percent.

“In reaching today’s decision, the board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate,” Stevens said. “At present, the potential risks of lower interest rates in this area are less than they were a year ago.”